-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KzE1Xe+GObDAQnmhN9azgs6zwQqCCpK2jdDKRC+pO+0lDmRa4YsLQT5DpgJD8Csg cE+nZjL39od2UVSNAHFV4w== 0000715957-96-000054.txt : 19960813 0000715957-96-000054.hdr.sgml : 19960813 ACCESSION NUMBER: 0000715957-96-000054 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960812 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DOMINION RESOURCES INC /VA/ CENTRAL INDEX KEY: 0000715957 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 541229715 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08489 FILM NUMBER: 96608301 BUSINESS ADDRESS: STREET 1: 901 E BYRD ST, WEST TOWER STREET 2: P O BOX 26532 CITY: RICHMOND STATE: VA ZIP: 23219 BUSINESS PHONE: 8047755700 MAIL ADDRESS: STREET 1: P O BOX 26532 STREET 2: 901 EAST BYRD STREET CITY: RICHMOND STATE: VA ZIP: 23261 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) /X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________ Commission file number 1-8489 DOMINION RESOURCES, INC. (Exact name of registrant as specified in its charter) Virginia 54-1229715 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 901 East Byrd Street, Richmond, Virginia 23219 (Address of principal executive offices) (Zip Code) Registrant's telephone number (804) 775-5700 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No _____ At July 31, 1996, 177,958,497 actual shares of common stock, without par value, of the registrant were outstanding. DOMINION RESOURCES, INC. INDEX Page Number PART I. Financial Information Item 1. Consolidated Financial Statements Consolidated Statements of Income - Three 3-4 and Six Months Ended June 30, 1996 and 1995 Consolidated Balance Sheets - June 30, 1996 5-6 and December 31, 1996 Consolidated Statements of Cash Flows 7-8 Six Months Ended June 30, 1996 and 1995 Notes to Consolidated Financial Statements 9-14 Item 2. Management's Discussion and Analysis 15-20 PART II. Other Information Item 1. Legal Proceedings 21 Item 5. Other Information 21-22 Item 6. Exhibits and Reports on Form 8-K 23 DOMINION RESOURCES, INC. PART I. FINANCIAL INFORMATION ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three Months Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 Millions, except per share amounts Operating revenues and income: Electric $ 1,029.1 $ 971.1 $2,193.9 $2,047.4 Nonutility 91.9 71.7 166.4 124.7 1,121.0 1,042.8 2,360.3 2,172.1 Operating expenses: Fuel, net 225.6 226.5 488.7 480.5 Purchased power capacity, net 165.9 154.7 360.1 330.6 Other operation 186.1 172.6 355.7 340.3 Maintenance 60.3 73.6 119.9 140.5 Restructuring 19.3 1.8 24.7 5.3 Depreciation and amortization 153.0 135.5 301.1 270.7 Other taxes 69.6 65.4 145.4 135.0 879.8 830.1 1,795.6 1,702.9 Operating income 241.2 212.7 564.7 469.2 Other income 3.6 2.5 6.4 4.8 Income before fixed charges and Federal income taxes 244.8 215.2 571.1 474.0 Fixed charges: Interest charges, net 95.7 96.2 190.9 191.4 Preferred dividends of Virginia Power 8.8 11.7 17.8 23.4 Preferred distribution of Va. Power affiliate, net 1.8 0.0 3.6 0.0 106.3 107.9 212.3 214.8 Income before provision for Federal income taxes 138.5 107.3 358.8 259.2 Provision for Federal income taxes 44.3 29.2 114.4 72.6 DOMINION RESOURCES, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (CONTINUED) Three Months Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 Millions, except per share amounts Net income $ 94.2 $ 78.1 $244.4 $186.6 Average Common Stock 177.4 172.9 177.0 172.6 Earnings per common share $ 0.53 $ 0.45 $ 1.38 $ 1.08 Dividends paid per common share $ 0.645 $ 0.645 $ 1.29 $ 1.29 __________________ The accompanying notes are an integral part of the Consolidated Financial Statements. DOMINION RESOURCES, INC. CONSOLIDATED BALANCE SHEETS ASSETS (UNAUDITED) June 30, December 31, 1996 1995* (Millions) Current assets: Cash and cash equivalents $ 59.8 $ 66.7 Trading securities 14.8 10.8 Customer accounts receivable, net 332.6 362.6 Other accounts receivable 137.7 104.2 Accrued unbilled revenues 186.8 179.5 Accrued taxes 12.9 Materials and supplies: Plant and general 156.3 160.2 Fossil fuel 59.1 71.2 Mortgage loans in warehouse 165.5 Other 132.0 141.5 1,257.5 1,096.7 Investments 1,444.1 1,442.7 Property, plant and equipment 16,256.6 15,977.4 Less accumulated depreciation and amortization 5,960.3 5,655.1 10,296.3 10,322.3 Deferred charges and other assets: Regulatory assets 798.1 816.4 Other 266.2 225.2 1,064.3 1,041.6 Total assets $14,062.2 $13,903.3 __________________ The accompanying notes are an integral part of the Consolidated Financial Statements. * The Balance Sheet at December 31, 1995 has been taken from the audited Consolidated Financial Statements at that date. DOMINION RESOURCES, INC. CONSOLIDATED BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY (UNAUDITED) June 30, December 31 1996 1995* (Millions) Current liabilities: Securities due within one year $ 400.1 $ 420.8 Short-term debt 353.2 236.6 Accounts payable, trade 322.9 336.7 Severance costs accrued 32.7 42.7 Accrued interest 107.2 110.5 Other 235.1 246.9 1,451.2 1,394.2 Long-term debt: Utility 3,590.7 3,889.4 Nonrecourse - nonutility 746.8 523.5 Other 262.1 199.0 4,599.6 4,611.9 Deferred credits and other liabilities: Deferred income taxes 1,700.6 1,661.1 Investment tax credits 263.8 272.2 Deferred fuel expenses 34.1 57.7 Other 356.7 340.2 2,355.2 2,331.2 Total liabilities 8,406.0 8,337.3 Virginia Power obligated mandatorily redeemable preferred securities of subsidiary trust ** 135.0 135.0 Preferred stock: Virginia Power stock subject to mandatory redemption 180.0 180.0 Virginia Power stock not subject to mandatory redemption 509.0 509.0 Common shareholders' equity: Common stock - no par 3,379.9 3,303.5 Retained earnings 1,443.3 1,427.6 Allowance on available-for-sale securities (8.1) (6.7) Other 17.1 17.6 4,832.2 4,742.0 Total liabilities & shareholders' equity $14,062.2 $13,903.3 The accompanying notes are an integral part of the Consolidated Financial Statements. * The Balance Sheet at December 31, 1995 has been taken from the audited Consolidated Financial Statements at that date. ** As described in Note(i) to Notes to Consolidated Financial Statements, the 8.05% Junior Subordinated Notes totaling $139.2 million principal amount constitute 100% of the Trusts assets. DOMINION RESOURCES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Six Months Ended June 30, 1996 1995 (Millions) Cash flows from operating activities: Net income $ 244.4 $ 186.6 Adjustments to reconcile net income to net cash: Depreciation, depletion and amortization 344.9 307.3 Deferred income taxes 31.6 42.5 Investment tax credits, net (8.6) (8.5) Allowance for other funds used during construction (1.8) (3.7) Deferred fuel expenses (23.6) 2.2 Deferred capacity expenses 6.0 (16.2) Changes in assets and liabilities: Accounts receivable 12.7 (5.2) Accrued unbilled revenues (7.2) 2.2 Materials and supplies 16.1 34.1 Accounts payable, trade (11.7) (41.6) Accrued interest and taxes (4.4) (10.1) Mortgage loans in warehouse (165.5) 0.0 Other changes (95.5) 13.6 Net cash flows from operating activities 337.4 503.2 Cash flows from (to) financing activities: Issuance of common stock 79.0 73.5 Issuance of preferred stock Issuance of long-term debt: Utility 24.5 240.0 Nonrecourse-nonutility 264.2 44.8 Issuance (repayment) of short-term debt 117.3 (33.5) Repayment of long-term debt and preferred stock (267.1) (301.5) Common dividend payments (228.2) (222.5) Other (5.5) (10.6) Net cash flows (to) financing activities (15.8) (209.8) DOMINION RESOURCES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED) Six Months Ended June 30, 1996 1995 (Millions) Cash flows (used in) investing activities: Capital expenditures-(excluding AFC-other funds) $(233.2) $(308.9) Investments in marketable securities 19.1 (8.7) Sale of accounts receivable 40.0 Sale of trust units 16.4 Other (114.4) (109.3) Net cash flows (used in) investing activities (328.5) (370.5) Decrease in cash and cash equivalents (6.9) (77.1) Cash and cash equivalents at beginning of period 66.7 146.7 Cash and cash equivalents at end of period $ 59.8 $ 69.6 Supplementary cash flows information: Cash paid during the period for: Interest (net of interest capitalized) $ 205.1 $ 186.7 Income taxes 100.8 70.8 Non-cash transactions from investing and financing activities: Exchange of long-term marketable securities $ 4.3 $ 9.8 The accompanying notes are an integral part of the Consolidated Financial Statements. DOMINION RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (a) Dominion Resources, Inc. (Dominion Resources) is a holding company head- quartered in Richmond, Virginia. Its primary business is Virginia Electric and Power Company (Virginia Power), which is a regulated public utility engaged in the generation, transmission, distribution and sale of electric energy within a 30,000 square mile area in Virginia and north- eastern North Carolina. It sells electricity to retail customers (including government agencies) and to wholesale customers such as rural electric cooperatives and municipalities. The Virginia service area comprises about 65 percent of Virginia's total land area, but accounts for 80 percent of its population. Dominion Resources also operates business subsidiaries active in independent power production; the acquisition and sale of natural gas reserves; in financial services; and in real estate. Some of the independent power and natural gas projects are located in foreign countries. Net assets of approximately $225 million are involved in independent power production operations in Latin America. In the opinion of Dominion Resources' management, the accompanying unaudited Consolidated Financial Statements contain all adjustments, consisting only of normal recurring accruals, necessary to present fairly the financial position as of June 30, 1996, the results of operations for the six-month periods ended June 30, 1996 and 1995, and cash flows for the six-month periods ended June 30, 1996 and 1995. These Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Dominion Resources Annual Report on Form 10-K for the year ended December 31, 1995. Certain amounts in the 1995 Consolidated Financial Statements have been reclassified to conform to the 1996 presentation. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. The consolidated financial statements include the accounts of the Company and its subsidiaries, with all significant intercompany transactions and accounts being eliminated on consolidation. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (b) Common Stock At June 30, 1996 there were 300,000,000 shares of common stock authorized of which 177,893,895 were issued and outstanding. Common shareholders' equity at June 30, 1996 also includes $18.9 million for amounts received under the Stock Purchase Plan for Customers of Virginia Power and the Automatic Dividend Reinvestment and Stock Purchase Plan for which shares have not yet been issued. Common shares issued during the referenced periods were as follows: DOMINION RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Three Months Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 Automatic Dividend Reinvestment and Stock Purchase Plan 727,704 728,349 1,418,180 1,374,347 Customer Stock Purchase Plan 0 0 0 0 Employee Savings Plan 122,656 0 123,265 0 Stock Repurchase and Retirement 0 0 (136,800) (377,000) Other (15) 242 75,140 32,823 Total Shares 850,345 728,591 1,479,785 1,030,170 (c) Long-Term Incentive Plan On February 19, 1996, the Organization and Compensation Committee of the Board of Directors of Dominion Resources awarded participants 47,556 shares of restricted common stock at an award price of $42.375 per share. The Stock has a three-year vested period. On February 23, 1996, the Organization and Compensation Committee of the Board of Directors awarded participants 24,728 shares of restricted common stock at an award price of $42.125 per share. The Stock has a three-year vested period. For the six-month period ending June 30, 1996, 12,422 shares were issued. As of June 30, 1996, options from 10,813 shares were exercisable from previous awards. (d) Preferred Stock - Virginia Power As of June 30, 1996, there were 1,800,000 and 5,090,140 issued and outstanding shares of preferred stock subject to mandatory redemption and preferred stock not subject to mandatory redemption, respectively. There are a total of 10,000,000 authorized shares of Virginia Power's preferred stock. (e) Provision for Federal Income Taxes Total Federal income tax expense differs from the amount computed by applying the statutory Federal income tax rate to pre-tax income for the following reasons: DOMINION RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Three Months Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 (Millions) Computation of Provision for Federal Income Tax: Pre-tax income $138.5 $107.3 $358.8 $259.2 Tax at statutory federal income tax rate of 35% applied to pre-tax income $ 48.5 $ 37.5 $125.6 $ 90.7 Changes in federal income taxes resulting from: Preferred dividends of Virginia Power 3.1 4.1 6.2 8.2 Nonconventional fuel credit (6.6) (6.4) (13.2) (13.7) Ratable amortization of investment tax credits (4.2) (4.2) (8.5) (8.5) Other, net 3.5 (1.8) 4.3 (4.1) Provision for Federal Income Tax Expense $ 44.3 $ 29.2 $114.4 $ 72.6 Effective Tax Rate 32.0% 27.2% 31.9% 28.0% (f) Contingencies Virginia Power Nuclear Insurance The Price-Anderson Act limits the total public liability of owners of nuclear power plants to $8.9 billion for a single nuclear incident. Virginia Power is a member of certain insurance programs that provide coverage for property damage to members' nuclear generating plants, replacement power and liability in the event of a nuclear incident. Virginia Power may be subject to retrospective premiums in the event of major incidents at nuclear units owned by covered utilities (including Virginia Power). For additional information, see Note P to CONSOLIDATED FINANCIAL STATEMENTS included in the Company's Annual Report on Form 10-K for the year ended December 31, 1995. Site Remediation With respect to the two Superfund sites located in Kentucky and Pennsylvania discussed in the Company's Annual Report on Form 10-K for the year ended December 31, 1995, under Note P to CONSOLIDATED FINANCIAL STATEMENTS, the estimate for future remediation costs has now been revised to fall within a range of $61.5 million to $72.5 million. Virginia Power's proportionate share of the cost is expected to be in the range of $1.7 million to $2.5 million, based upon allocation formulas and the volume of waste shipped to the sites. As of June 30, 1996, Virginia Power accrued a reserve of $1.7 million to meet its obligations at these two sites. Based on a financial assessment of the PRPs involved at these sites, Virginia Power has determined that it is probable that the PRPs will fully pay the costs apportioned to them. DOMINION RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Nonutility Subsidiaries: Dominion Energy Dominion Cogen, Inc., is a wholly owned subsidiary of Dominion Energy with an investment interest in the Clear Lake cogeneration plant near Houston, Texas. Under terms of the investment agreement, Dominion Resources must provide contingent equity support to Dominion Energy. While management believes that the possibility of such support is remote, Dominion Resources could be required to insure that Dominion Energy has sufficient funds to meet its guarantee of $55.5 million. Dominion Energy has general partnership interests in certain of its energy ventures. Accordingly, Dominion Energy may be called upon to fund future operation of these investments to the extent operating cash flow is insufficient. Dominion Capital On May 13, 1996, Dominion Mortgage Services, Inc. (Dominion Mortgage) a wholly-owned subsidiary of Dominion Capital purchased from Resource Mortgage Capital, Inc. (Resource Mortgage) certain assets in exchange for a $47.5 million promissory note (the Note). To secure the obligations of Dominion Mortgage under the Note, Dominion Resources guarantees to Resource Mortgage the payment of all amounts due by Dominion Mortgage to Resource Mortgage. As of June 30, 1996, Saxon Mortgage, Inc., an indirect wholly-owned subsidiary of Dominion Capital, has entered into commitments of approximately $116 million to fund single-family mortgages. The commitments for single-family mortgages have original terms of not more than 60 days. (g) Lines of Credit Dominion Resources and its subsidiaries have lines of credit and revolving credit agreements that provide for maximum borrowings of $1,485.8 million. At June 30, 1996, $145.9 million had been borrowed under such agreements. In addition, these credit agreements supported $262.1 million of Dominion Resources' commercial paper and $384.8 million of nonrecourse commercial paper issued by Dominion Resources' subsidiaries which was outstanding at June 30, 1996. A total of $352.1 million of the commercial paper is classified as long-term debt since it is supported by revolving credit agreements that have expiration dates extending beyond one year. DOMINION RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (h) Investments Investments at June 30, 1996 and December 31, 1995 are as follows: June 30, December 31, 1996 1995 (Millions) Investments in affiliates $ 431.3 $ 436.2 Available-for-sale securities 262.6 285.5 Nuclear decommissioning trust funds 386.7 351.4 Investments in real estate 126.3 133.0 Other 237.2 236.6 $1,444.1 $1,442.7 (i) Virginia Power Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trust In 1995, Virginia Power established Virginia Power Capital Trust I (VP Capital Trust). VP Capital Trust sold 5,400,000 shares of Preferred Securities for $135.0 million, representing preferred beneficial interests and 97% beneficial ownership in the assets held by VP Capital Trust. Virginia Power issued $139.2 million of its 1995 Series A, 8.05% Junior Subordinated Notes (the Notes) in exchange for the $135.0 million realized from the sale of the Preferred Securities and $4.2 million of common securities of VP Capital Trust. The common securities represent the remaining 3% beneficial ownership interest in the assets held by VP Capital Trust. The Notes constitute 100% of VP Capital Trust's assets. (j) Restructuring Charges In March 1995, Virginia Power announced the implementation phase of its Vision 2000 program. For additional information, see Note O to CONSOLIDATED FINANCIAL STATEMENTS included in the Company's Annual Report on Form 10-K for the year ended December 31, 1995. Restructuring charges of $19.3 million and $24.7 million for the three months and six months, respectively, ended June 30, 1996, included severance costs, purchase power contract cancellation and negotiated settlement costs and other costs incurred directly as a result of the Vision 2000 initiatives. The Vision 2000 review of operations is expected to continue through 1996 and additional costs will be incurred. At this time, Virginia Power management cannot estimate the additional restructuring costs yet to be incurred. In May 1995, Virginia Power established comprehensive involuntary severance packages for employees who lose their positions as a result of these initiatives. Through June 30, 1996, management had decided to eliminate 1,195 positions. The recognition of severance costs resulted in a charge to operations in the first and second quarter of $3.2 million and $10.6 million, respectively. At June 30, 1996, 995 employees have been terminated and severance payments totaling $28.3 million have been made. Virginia Power estimates that these staffing reductions will result in annual savings, net of outsourcing costs, in the range of $55 million to $65 DOMINION RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) million. These savings will be reflected in lower construction expenditures as well as lower operation and maintenance expenses. (k) Acquisitions For more information on acquisitions, see PART II, Item 5. Other Information, The Company. DOMINION RESOURCES, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS Dominion Resources - Consolidated Financial Condition Earnings Per Share Three Months Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 Virginia Power $0.49 $0.38 $1.31 $0.98 Nonutility .04 .07 .07 .10 Consolidated $0.53 $0.45 $1.38 $1.08 Virginia Power's earnings were up 11 cents and 33 cents for the three months ended and six months ended June 30, 1996, respectively, when compared to the same periods for 1995. The increases in earnings are primarily due to the colder weather experienced in the first quarter of 1996 and the warmer weather encountered in the second quarter of 1996. Dominion Resources non-utility subsidiaries earnings decreased by 3 cents for the three month and six month periods when compared to the same periods for 1995. The decreases were due to the gain on the sale of the remaining Black Warrior Trust units in June 1995. Dividends On July 18, 1996, the board of directors of Dominion Resources declared a quarterly common stock dividend of $0.645 per share, payable September 20, to holders of record at the close of business August 30, 1996. Financing Activities Common Stock Issuance Dominion Resources issued 1,479,785 net shares of common stock primarily through its Automatic Dividend Reinvestment and Stock Purchase Plan including the repurchase of 136,800 shares on the open market (see Note (b) to the Notes to the CONSOLIDATED FINANCIAL STATEMENTS) during the six-month period ended June 30, 1996. The proceeds from issuance of common stock are invested on a short-term basis by Dominion Resources and ultimately utilized to provide equity capital to its subsidiaries generally within the same calendar year as the issuance of the common stock. DOMINION RESOURCES, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) Virginia Power Liquidity and Capital Resources Cash Flows From Operations Internal generation of cash during the first six months of 1996 provided 155% of funds required for Virginia Power's capital requirements compared to 84% during the first six months of 1995. With the completion of the Clover Power Station, Virginia Power is in a period in which internal cash generation should exceed construction expenditures. As detailed in the Consolidated Statements of Cash Flows, cash flow from operating activities for the six-month period ended June 30, 1996 increased $71.3 million as compared to the six-month period ended June 30, 1995 primarily as a result of the colder and warmer weather experienced in the first six months of 1996. Cash Flows (To) Financing Activities Cash from (to) financing activities was as follows: Six Months Ended June 30, 1996 1995 (Millions) Mortgage bonds $ 200.0 Medium-term notes 40.0 Issuance of short-term debt, net $125.1 39.5 Issuance of tax exempt securities 24.5 Repayment of long-term debt and preferred stock (220.9) (246.6) Dividends (209.5) (219.3) Other (3.7) (4.7) Total $(284.5) $(191.1) Financing activities for the first six months of 1996 resulted in a net cash outflow of $284.5 million. During the first quarter of 1996, $34.4 million of Medium-Term Notes matured. In addition, Virginia Power issued $24.5 million of variable rate solid waste disposal securities to refund $24.5 million of securities assumed in its acquisition of the North Branch Power Station. In the second quarter of 1996, $162 million of Medium-Term Notes matured. Virginia Power increased its commercial paper program limit to $500 million in June 1996 with the execution of a $300 million and a $200 million revolving credit facility, that replaced existing liquidity support. As of June 30, 1996, $294.1 million was outstanding under Virginia Power's commercial paper program, which is an increase of $125.1 million from the DOMINION RESOURCES, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) December 31, 1995 outstanding balance. The proceeds from the sale of commercial paper were used primarily to replace mandatory debt maturities and for other capital requirements. Cash Flows (Used In) Investing Activities Cash from (used in) investing activities was as follows: Six Months Ended June 30, 1996 1995 (Millions) Utility plant expenditures $(157.6) $(283.2) Nuclear fuel (57.6) (16.9) Nuclear decommissioning contributions (18.1) (12.3) Sale of accounts receivable 40.0 Purchase of subsidiary assets (14.6) Other (7.2) (8.8) Total $(255.1) $(281.2) Investing activities for the first six months of 1996 resulted in a net cash outflow of $255.1 million primarily due to $157.6 million of construction expenditures and $57.6 million of nuclear fuel expenditures. Of the construction expenditures, approximately $107.5 million was spent on transmission and distribution projects, and $29.6 million on power production. Results of Operations Balance available for Common Stock increased by $21.5 million and $62 million for the three months and six months, respectively, ended June 30, 1996, as compared to the same periods in 1995, primarily as a result of the colder and warmer weather experienced in the first six months of 1996. DOMINION RESOURCES, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) Operating Revenues Operating revenues changed primarily due to the following: Three Months Ended Six Months Ended June 30, June 30, 1996 vs. 1995 1996 vs. 1995 (Millions) Weather $28.3 $113.6 Customer growth 8.4 18.5 Change in base revenues (7.4) (12.7) Fuel cost recovery (16.1) (39.9) Other, net 20.1 12.0 Total retail 33.3 91.5 Sales for resale 19.7 43.4 Other operating revenues 5.0 11.6 Total revenues $ 58.0 $146.5 Customer kilowatt-hour sales changed as follows: Three Months Ended Six Months Ended June 30, June 30, 1996 vs. 1995 1996 vs.1995 Residential 12.2% 14.4% Commercial 6.0 7.4 Industrial 0.6 0.1 Public authorities 3.3 4.4 Total retail sales 6.5 8.2 Resale 62.3 56.9 Total sales 12.0 13.4 Heating and cooling degree days during the second quarter were as follows: 1996 1995 Normal Heating degree days 374 281 311 Percentage change compared to prior year 33.1 18.6 Cooling degree days 468 428 436 Percentage change compared to prior year 9.3 (24.5) Heating and cooling degree days during the first six months were as follows: 1996 1995 Normal Heating degree days 2,708 2,204 2,361 Percentage change compared to prior year 22.9 (9.9) Cooling degree days 468 428 443 Percentage change compared to prior year 9.3 (24.9) DOMINION RESOURCES, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) The increase in kilowatt-hour retail sales for the three- and six-month periods ended June 30, 1996, as compared to the same periods in 1995, reflects the colder and warmer weather experienced in 1996. The increase in sales for resale for the three- and six-month periods ended June 30, 1996, as compared to the same periods in 1995, was primarily due to colder and warmer weather experienced by other utilities in surrounding regions and increased marketing efforts by Virginia Power. Fuel, net Fuel, net decreased for the three-month period ended June 30, 1996, as compared to the same period in 1995, primarily as a result of a higher recovery of fuel expenses subject to deferral accounting in 1995. Restructuring As part of the Vision 2000 programs (see Note (i) to CONSOLIDATED FINANCIAL STATEMENTS), Virginia Power recorded $24.7 million and $5.3 million of restructuring charges in the first six months of 1996 and 1995, respectively. Restructuring charges included severance costs, purchase power contract cancellation and negotiated settlement costs and other costs. Virginia Power estimates that the staffing reductions, including those reported during 1995, will result in annual savings, net of outsourcing costs, in the range of $55 million to $65 million. Virginia Power will incur additional restructuring charges in 1996; however, the amount of restructuring charges yet to be incurred is not known at this time. Furthermore, because Virginia Power's review of its operations has not been completed, the amount of savings ultimately to be realized cannot be estimated at this time. When realized, the savings will be reflected in lower construction expenditures as well as lower operation and maintenance expenses. Operation - Other and Maintenance Operation - other and maintenance expenses decreased for the three- and six- month periods ended June 30, 1996, as compared to the same period in 1995, primarily as a result of decreased production plant outage costs due to fewer outages and restructuring savings due to implemented Vision 2000 initiatives, partially offset by an increase in transmission and distribution service restoration costs resulting from multiple storm damage and the expenses associated with A&C Enercom, Inc., a wholly owned subsidiary of Virginia Power formed in January 1996. Income Taxes Income taxes increased for the three- and six-month periods ended June 30, 1996, as compared to the same period in 1995, primarily as a result of increased income subject to tax. DOMINION RESOURCES, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) Future Issues Competition On April 24, 1996 the Federal Energy Regulatory Commission (FERC) issued final rules on open access transmission service, stranded costs, standards of conduct and open access same-time information systems (OASIS). On July 9, 1996, Virginia Power filed an open access transmission service tariff in compliance with FERC's Order No. 888, Promoting Wholesale Competition Through Open Access Non-discriminatory Transmission Services by Public Utilities. Utilities must also take service under their own tariffs for wholesale power sales. The rule provides for stranded cost recovery from departing customers. Utilities must participate in an OASIS by November 1, 1996, and comply with standards of conduct that require separation of transmission operations/reliability functions from wholesale merchant/marketing functions. FERC also issued a notice of proposed rulemaking (NOPR) proposing replacement of open access tariffs with a capacity reservation tariff by December 31, 1997. Other Except for the historical information contained herein, the matters discussed in this report are forward-looking statements which involve risks and uncertainties, including but not limited to regulatory, economic, competitive, governmental and technological factors affecting Dominion Resources' operations, rates, markets, products, services and prices, and other factors discussed herein and in Dominion Resources' other filings with the Securities and Exchange Commission. Dominion Resources and its Nonutility Subsidiaries Liquidity and Capital Resources During the first six months of 1996, Dominion Resources' nonutility subsidiaries expended $68.5 million on capital requirements. Estimated capital requirements for 1996 are $144.4 million. Results of Operations Nonutility revenues and income decreased for the three-month and six-month periods ended June 30, 1996, as compared to the same periods in 1995, primarily due to the gain on the sale of the remaining Black Warrior Trust units in June 1995. Commitments and Contingencies For additional information on commitment and contingencies, see Note (f) to CONSOLIDATED FINANCIAL STATEMENTS. DOMINION RESOURCES, INC. PART II. - OTHER INFORMATION Item 1. Legal Proceedings In reference to the proceeding before the Virginia State Corporation Commission (Virginia Commission) into the holding company structure and the relationship between Dominion Resources and Virginia Power, on May 24, 1996, the Virginia Commission issued an order directing Virginia Power to (i) adopt conflict-of- interest standards for its board of directors and to report quarterly to the Commission on its progress, (ii) file an independent certified annual audit of affiliate transactions with its Annual Report of Affiliate Transactions and (iii) examine with the Staff at the Commission the extent to which Virginia Power is paying for duplicate executive services from Dominion Resources, if any, in the upcoming Annual Informational Filing with the Commission. The Virginia Commission continued the proceeding to July 12, 1997 to allow the Commission and its Staff to continue to monitor the corporate governance, operation efficiency and effectiveness of Virginia Power and Dominion Resources and to evaluate what further recommendations of the Staff, if any, be implemented. In a related matter the consent order entered into between Dominion Resources and Virginia Power on February 20, 1995 expired according to its terms on July 2, 1996. Virginia Power With regard to the civil action filed December 13, 1995 in the United States District Court for the Eastern District of Virginia. Norfolk Division, against the City of Norfolk and Virginia Power by a landowner alleging contamination of his property by toxic pollutants originating on an adjacent property now owned by the city and formerly owned by Virginia Power, on August 7, 1996, the Court entered an order dismissing with prejudice the federal law claim, and dismissing the state law claims without prejudice for the plaintiff to file in state court on the state law claims. Item 5. Other Information The Company In reference to the purchase of the Kincaid Power Station by Kincaid Generation, L.L.C. (LLC), a subsidiary of Dominion Energy, Inc. (Dominion Energy), on July 26, 1996, the International Brotherhood of Electrical Workers, AFL-CIO, Local Union 15, (IBEW) filed a complaint against Commonwealth Edison Company (ComEd), LLC and the Illinois Commerce Commission (the ICC) requesting injunctive relief to prevent ComEd and LLC from proceeding with their petition before the ICC for approval of LLC's acquisition of the power station. IBEW claims that the asset sale agreement relating to such acquisition is in violation of an Illinois statute concerning collective bargaining agreements because such agreement does not state that LLC will be subject to the current collective bargaining agreement between ComEd and IBEW. The closing under the asset sale agreement is subject to various regulatory approvals and other conditions, including the consent of the ICC. Dominion Energy acquired a 60-percent ownership and management interest for approximately $228 million in Empresa de Generation Electrica NorPeru, S.A. (EGENOR). Dominion Energy expects to sell 50% of its ownership interest in the EGENOR project to a third party by the end of August, 1996. EGENOR is a generation company providing power in Peru's northern region. Government-owned ElectroPeru, S.A., will retain a 40-percent interest in EGENOR. DOMINION RESOURCES, INC. PART II. - OTHER INFORMATION (CONTINUED) As previously reported, Dominion Capital, Inc. through its wholly-owned subsidiary, Dominion Mortgage Services, Inc., acquired on May 13, 1996, Resource Mortgage Capital Inc's single-family mortgage operations for an aggregate purchase price of approximately $68 million. Virginia Power Regulation General The Commission Staff issued its Report on July 31, 1996. The Report contained 14 recommendations, including continued monitoring of wholesale and retail competition in the industry, increased monitoring of service quality, preservation of state jurisdiction over retail service, improved price signals, further study of stranded cost recovery, and increased efforts to renegotiate non-utility generation contracts. Written comments on the Report are due September 16, 1996. In reference to the North Carolina Utilities Commission (NCUC) informal information gathering proceeding into the question of whether retail competition should be allowed in North Carolina, on May 7, 1996, the NCUC postponed indefinitely the time for filing comments in this matter. On May 15, 1996, the NCUC issued an order initiating an investigation of emerging issues in the restructuring of the electric industry. As ordered, Virginia Power filed comments on July 16, 1996. Reply comments from the NCUC are due August 15, 1996. Rates FERC On July 9, 1996, Virginia Power filed an open access transmission service tariff in compliance with FERC's Order No. 888, Promotion Wholesale Competition Through Open Access Non-Discriminatory Transmission Services by Public Utilities. For additional information, see Future Issues - Competition under MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. On May 14, 1996, the Department of the Navy, on behalf of the Department of Defense (DOD), filed a Petition requesting FERC to declare DOD a "wholesale customer" within Virginia. As an alternative, the Navy requested FERC to order Virginia Power to wheel power to DOD installations in Virginia. An agreement was subsequently reached in principle for a new power supply contract. On June 24, 1996, the Navy moved to withdraw its Petition, stating that the concerns expressed in the Petition had been resolved. On July 15, 1996, three power marketers filed a protest with DOD challenging the sole source negotiation and impending sole source contract with Virginia Power and requesting that the Navy withhold contract award until resolution of the protest. Virginia Power has not yet responded to the protest, but takes the position that procurement of electricity from other than Virginia Power in Virginia Power's exclusive territory would violate both state and federal law. DOMINION RESOURCES, INC. PART II. - OTHER INFORMATION (CONTINUED) Virginia On May 29, 1996, Virginia Power filed an Application with the Virginia Commission seeking authority to implement a monitoring program that requires certain Non-Utility Generators to provide certain information sufficient to determine continued compliance with the "Qualifying Facility" (QF) requirements of the Public Utility Regulatory Policies Act of 1978 (PURPA). On June 13, 1996, the Virginia Commission ordered that the application be docketed and that any interested party file its responsive memorandum on or before August 16, 1996. On June 7, 1996, Virginia Power filed an application with the Virginia Commission to purchase a gas-fired combined cycle generator from Richmond Power Enterprise, L.P. (RPE) and to enter into a purchased power contract with RPE and Enron Power Marketing, Inc. (EPMI) without competitive bidding. If approved, Virginia Power will purchase the generator and the power purchase and operating agreement (PPOA) will be amended to reduce capacity payments, shorten the term of the agreement and provide for sales of capacity and energy by RPE's assignee, EPMI, to Virginia Power from sources outside Virginia Power's service territory rather than from the generator. Virginia Power estimates this arrangement will result in a savings of $63 million over the life of the existing PPOA. The Staff will file its report or testimony by September 4, 1996. On July 24, 1996, the Virginia Commission authorized expansion of the Real Time Pricing Schedule to include commercial and industrial customers with loads over 5 Mw. This option was previously available only to industrial customers with loads in excess of 10 Mw. Item 6. Exhibits and Reports on Form 8-K (a) 11- Statement re: computation of per share earnings (included in this Form 10-Q on page 4) 27- Financial Data Schedule (filed herewith) (b) Report on Form 8-K None SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DOMINION RESOURCES, INC. Registrant BY /s/JAMES L. TRUEHEART James L. Trueheart Vice President and Controller (Principal Accounting Officer) August 12, 1996 EX-27 2
UT 1,000,000 6-MOS DEC-31-1996 JUN-30-1996 PER-BOOK 9486 2254 1258 1064 0 14062 3380 17 1435 4832 180 509 4600 353 0 0 400 0 0 0 3188 14062 2360 117 1793 1796 565 6 571 191 244 18 0 228 0 337 1.38 1.38
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