-----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,
JufolssshFfQpEG67LgxDzY8D/zthXzccfb2iTwLt4fM8CClMdfIwMOOrgmPPGQA
R1RY1urjDbBgeOkyuEwhwQ==
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 September 30, 1999 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 (State of incorporation) 120 Tredegar Street Richmond, Virginia 23219 (Address of principal executive offices) (Zip Code) 54-1229715 (I.R.S. Employer Identification No.) Registrant's telephone number (804) 819-2000 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 October 31, 1999, the latest practicable date for determination, 190,807,645 shares of common stock, without par value, of the registrant were outstanding. DOMINION RESOURCES, INC. INDEX Page PART I. Financial Information Item 1. Consolidated Financial Statements Consolidated Statements of Income - Three and Nine Months Ended September 30, 1999 and 1998 3 Consolidated Balance Sheets - September 30, 1999 and December 31, 1998 4-5 Consolidated Statements of Cash Flows - Nine Months Ended September 30, 1999 and 1998 6 Consolidated Statements of Changes in Other Comprehensive Income - Three and Nine Months Ended September 30, 1999 and 1998 7 Notes to Consolidated Financial Statements 8-17 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 18-29 Item 3. Quantitative and Qualitative Disclosures About Market Risk 30-31 PART II. Other Information Item 1 Legal Proceedings 32 Item 5. Other Information 32-33 Item 6. Exhibits and Reports on Form 8-K 34 DOMINION RESOURCES, INC. PART I. FINANCIAL INFORMATION ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three Months Ended Nine Months Ended 1999 1998 1999 1998 (Millions, except per share amounts) Operating revenues and income: Virginia Power $1,439.9 $1,347.6 $3,615.0 $3,304.4 East Midlands 1,009.5 Nonutility 222.6 196.7 655.8 589.1 1,662.5 1,544.3 4,270.8 4,903.0 Operating expenses: Fuel, net 320.8 285.0 787.5 758.4 Purchased power capacity, net 195.9 216.8 604.3 601.0 Impairment of regulatory assets 158.6 Supply and distribution-East Midlands 654.9 Other operation and maintenance 377.4 339.4 1,003.2 1,040.0 Depreciation, depletion and amortization 190.0 176.4 544.2 564.2 Other 91.9 91.1 236.0 242.6 1,176.0 1,108.7 3,175.2 4,019.7 Operating income 486.5 435.6 1,095.6 883.3 Other income: Gain on sale of East Midlands 332.3 332.3 Other 20.4 40.5 69.1 73.5 20.4 372.8 69.1 405.8 Fixed charges: Interest charges, net 132.6 127.9 371.5 465.7 Preferred dividends and distributions of subsidiary trusts 16.9 15.0 49.9 48.3 149.5 142.9 421.4 514.0 Income before income taxes, minority interests, and extraordinary item Provision for income taxes 121.0 234.9 240.7 269.2 Minority interests 4.3 6.0 14.6 24.5 Income before extraordinary item 232.1 424.6 488.0 481.4 Extraordinary item, net of tax ______ ______ 254.8 ______ Net income $ 232.1 $ 424.6 $ 233.2 $ 481.4 Average shares of common stock - basic and diluted 191.4 196.1 192.3 194.8 Basic and diluted earnings per share: Income before extraordinary item $ 1.21 $ 2.17 $ 2.53 $ 2.47 Extraordinary Item ______ ______ 1.32 ______ Net income $ 1.21 $ 2.17 $ 1.21 $ 2.47 Dividends paid per common share $ 0.645 $ 0.645 $ 1.935 $ 1.935
Number
September 30,
September 30,
357.4
665.5
743.3
775.1
_________________
The accompanying notes are an integral part of the Consolidated Financial Statements.
DOMINION RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(UNAUDITED)
|
September 30, |
December 31, |
||||
|
1999 |
1998* |
||||
|
(Millions) |
|||||
Current assets: |
||||||
Cash and cash equivalents |
$ 357.0 |
$ 425.6 |
||||
Customer accounts receivable, net |
824.2 |
777.8 |
||||
Other accounts receivable |
271.1 |
256.5 |
||||
Materials and supplies: |
|
|
||||
Plant and general |
146.5 |
142.0 |
||||
Fossil fuel |
103.8 |
95.0 |
||||
Mortgage loans in warehouse |
312.5 |
140.3 |
||||
Commodity contract assets |
352.2 |
179.8 |
||||
Other |
262.1 |
268.3 |
||||
2,629.4 |
2,285.3 |
|||||
Investments: |
|
|
||||
Investments in affiliates |
424.4 |
382.1 |
||||
Available-for-sale securities |
482.6 |
500.0 |
||||
Nuclear decommissioning trust funds |
780.1 |
705.1 |
||||
Loans receivable, net |
1,998.5 |
1,686.5 |
||||
Investments in real estate |
90.0 |
93.9 |
||||
Other |
378.0 |
263.0 |
||||
|
4,153.6 |
3,630.6 |
||||
|
|
|
||||
Property, plant and equipment: |
|
|
||||
Property, plant and equipment |
18,998.6 |
18,106.0 |
||||
Less accumulated depreciation, depletion and amortization |
7,988.6 |
7,469.4 |
||||
|
|
|
||||
|
11,010.0 |
10,636.6 |
||||
Deferred charges and other assets: |
|
|
||||
Regulatory assets |
223.7 |
620.0 |
||||
Goodwill |
149.6 |
150.0 |
||||
Other |
248.5 |
194.5 |
||||
|
621.8 |
964.5 |
||||
|
|
|
||||
Total assets |
$18,414.8 |
$17,517.0 |
__________________
The accompanying notes are an integral part of the Consolidated Financial Statements.
* The Balance Sheet at December 31, 1998 has been derived from the audited Consolidated Financial Statements at that date.
DOMINION RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
(UNAUDITED)
September 30, |
December 31, |
|||
|
(Millions) |
|||
Current liabilities: |
|
|
||
Securities due within one year |
$ 639.3 |
$ 442.9 |
||
Short-term debt |
909.9 |
300.8 |
||
Accounts payable, trade |
814.8 |
698.5 |
||
Accrued interest |
112.2 |
109.1 |
||
Accrued payroll |
76.4 |
79.0 |
||
Accrued taxes |
232.4 |
175.3 |
||
Commodity contract liabilities |
328.3 |
265.8 |
||
Other |
232.7 |
266.8 |
||
|
3,346.0 |
2,338.2 |
||
Long-term debt: |
|
|
||
Virginia Power |
3,486.7 |
3,464.7 |
||
Nonrecourse - nonutility |
3,015.2 |
2,727.9 |
||
Dominion UK |
55.2 |
55.6 |
||
Other |
300.0 |
3.1 |
||
|
6,857.1 |
6,251.3 |
||
Deferred credits and other liabilities: |
|
|
||
Deferred income taxes |
1,633.9 |
1,792.5 |
||
Investment tax credits |
150.8 |
221.4 |
||
Other |
230.9 |
212.8 |
||
2,015.6 |
2,226.7 |
|||
Total liabilities |
12,218.7 |
10,816.2 |
||
Minority interest |
296.9 |
310.9 |
||
Commitments and contingencies (Note I) |
|
|
||
Company obligated mandatory redeemable preferred securities ** |
385.0 |
385.0 |
||
Virginia Power preferred stock: |
||||
Subject to mandatory redemption |
|
180.0 |
||
Not subject to mandatory redemption |
509.0 |
509.0 |
||
Common shareholders' equity: |
|
|
||
Common stock - no par |
3,778.7 |
3,933.4 |
||
Retained earnings |
1,245.2 |
1,386.4 |
||
Accumulated other comprehensive income |
(34.9) |
(20.1) |
||
Other |
16.2 |
16.2 |
||
|
5,005.2 |
5,315.9 |
||
Total liabilities & shareholders' equity |
$18,414.8 |
$17,517.0 |
____________
The accompanying notes are an integral part of the Consolidated Financial Statements.
* The Balance Sheet at December 31, 1998 has been derived from the audited Consolidated Financial Statements at that date.
**As described in Note (G) to Notes To Consolidated Financial Statements, the 7.83% and 8.05% Junior Subordinated Notes totaling $257.7 and $139.2 million principal amounts constitute 100% of the Trusts' assets.
DOMINION RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
|
|
Nine Months Ended |
|
1999 |
1998 |
|
(Millions) |
||
Cash flows from (used in) operating activities: |
|
|
Net income |
$ 233.2 |
$ 481.4 |
Adjustments to reconcile net income to net cash: |
|
|
Depreciation, depletion and amortization |
604.2 |
626.2 |
Gain on sale of East Midlands |
|
(332.3) |
Extraordinary item, net of income taxes |
254.8 |
|
Impairment of regulatory assets |
|
158.6 |
Changes in assets and liabilities: |
|
|
Accounts receivable |
(77.0) |
(23.0) |
Accounts payable, trade |
72.4 |
156.9 |
Purchase and originations of mortgage loans |
(1,777.5) |
(1,586.3) |
Proceeds from sales and principal collections of mortgage loans |
1,605.3 |
1,297.4 |
Commodity contract assets and liabilities |
(103.9) |
52.7 |
Accrued interest and taxes |
37.0 |
141.6 |
Other |
(13.3) |
(144.9) |
Net cash flows from operating activities |
835.2 |
828.3 |
Cash flows from (used in) financing activities: |
|
|
Issuance of common stock |
|
354.3 |
Repurchase of common stock |
(159.2) |
(56.2) |
Issuance of long-term debt |
4,243.2 |
3,220.7 |
Issuance of short-term debt |
407.8 |
61.3 |
Repayment of long-term debt |
(3,617.7) |
(3,101.8) |
Repayment of short-term debt |
|
(148.7) |
Common dividend payments |
(371.6) |
(378.2) |
Other |
(37.8) |
(32.4) |
Net cash flows from (used in) financing activities |
464.7 |
(81.0) |
Cash flows from (used in) investing activities: |
|
|
Utility capital expenditures |
(492.2) |
(462.8) |
Non-utility capital expenditures |
(71.0) |
(75.1) |
Acquisition of natural gas and independent power properties |
(131.5) |
(68.1) |
Proceeds from sale of East Midlands |
|
1,409.4 |
Loan originations |
(1,818.9) |
(1,958.2) |
Repayment of loan originations |
1,526.3 |
1,386.0 |
Acquisition of businesses |
(166.6) |
(339.0) |
Purchase of securities |
(102.1) |
(45.6) |
Investments in affiliates |
(42.8) |
(19.0) |
Other investments |
(73.7) |
15.3 |
Proceeds from sale of securities |
121.7 |
64.0 |
Other |
(117.7) |
(10.8) |
Net cash flows used in investing activities |
(1,368.5) |
(103.9) |
Increase (decrease) in cash and cash equivalents |
(68.6) |
643.4 |
Cash and cash equivalents at beginning of period |
425.6 |
321.7 |
Cash and cash equivalents at end of period |
$ 357.0 |
$ 965.1 |
DOMINION RESOURCES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN OTHER COMPREHENSIVE INCOME
(UNAUDITED)
|
Three Months Ended |
Nine Months Ended |
||
September 30, |
September 30, |
|||
|
1999 |
1998 |
1999 |
1998 |
|
(Millions) |
|||
Other Comprehensive Income: |
|
|
|
|
Unrealized gains (losses) on investment securities: |
|
|
|
|
Pre-tax |
$ (12.2) |
$ (2.6) |
$ (4.9) |
$ 2.0 |
Tax |
3.6 |
0.9 |
(0.4) |
(0.7) |
Net of tax |
(8.6) |
(1.7) |
(5.3) |
1.3 |
Foreign currency translation adjustments |
(7.5) |
(11.9) |
(9.5) |
(6.1) |
Increase in other comprehensive income |
(16.1) |
(13.6) |
(14.8) |
(4.8) |
Accumulated other comprehensive income at beginning of period |
(18.8) |
5.5 |
(20.1) |
(3.3) |
Accumulated other comprehensive income at end of period |
$(34.9) |
$ (8.1) |
$(34.9) |
$(8.1) |
______________________
The accompanying notes are an integral part of the Consolidated Financial Statements.
DOMINION RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(A) DOMINION RESOURCES AND INTERIM REPORTING POLICIES
NATURE OF OPERATIONS
General Organization and Legal Description
Dominion Resources is a holding company headquartered in Richmond, Virginia. Its principal subsidiary is Virginia Electric and Power Company (Virginia Power), which is a regulated public utility. Virginia Power is engaged in the generation, transmission, distribution and sale of electric energy within a 30,000 square mile area in Virginia and northeastern North Carolina. It sells electricity to retail customers (including government agencies) and to wholesale customers such as rural electric cooperatives, power marketers and municipalities. The Virginia service area comprises about 65 percent of Virginia's total land area, but accounts for 80 percent of its population. Virginia Power's wholesale power group engages in off-system wholesale purchases and sales of electricity and purchases and sales of natural gas beyond the geographic limits of Virginia Power's service territory.
Dominion Resources' subsidiary Dominion Energy is engaged in independent power production and the acquisition and sale of natural gas and oil reserves. Some of the independent power and natural gas and oil businesses are located in foreign countries. In Latin America, Dominion Energy is engaged in power generation. However, see Note (L) for information about the sale of such interests. In Canada, Dominion Energy is engaged in natural gas exploration, production and storage. Including the Latin American power generation interests being sold, Dominion Energy's net investment in foreign operations is approximately $416.2 million at September 30, 1999.
Dominion Capital is Dominion Resources' financial services subsidiary. Dominion Capital's primary business is financial services which includes commercial lending, merchant banking and residential mortgage lending.
Dominion Resources' United Kingdom subsidiary, Dominion U.K. Holding, Inc., owns an 80% interest in Corby Power Station, a 350 megawatt natural gas fired power station located in Northamptonshire, about 90 miles north of London.
Dominion Resources translates foreign currency financial statements by adjusting balance sheet accounts using the exchange rate at the balance sheet date and income statement accounts using the average exchange rate for the reporting period.
GENERAL
In the opinion of Dominion Resources' management, the accompanying unaudited Consolidated Financial Statements contain all adjustments, including normal recurring accruals, necessary to present fairly the financial position as of September 30, 1999, the results of operations for the three-month and nine-month periods ended September 30, 1999 and 1998, and cash flows for the nine-month periods ended September 30, 1999 and 1998.
These Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes included in the Dominion Resources Annual Report on Form 10-K for the year ended December 31, 1998.
The Consolidated Financial Statements include the accounts of Dominion Resources and its subsidiaries, with all significant intercompany transactions and accounts being eliminated on consolidation.
Dominion Resources uses the equity method when accounting for its 80% investment in Corby Power Ltd. (Corby) as the company believes that Corby's governing agreements give substantive participating rights to the minority shareholder. Corby owns and operates a 350-megawatt gas-fired power station in England. Corby had total revenues of $34.8 million and total expenses of $27.5 million for the third quarter ending September 30, 1999. Also, Corby had total revenues of $98.4 million and total expenses of $87.6 million for the nine-month period ending September 30, 1999. Interest and taxes were included in total expenses for each period.
DOMINION RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
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.
The results of operations for the interim periods are not necessarily indicative of the results expected for the full year. Information for quarterly periods is affected by seasonal variations in sales, rate changes and other factors.
Certain amounts in the 1998 financial statements have been reclassified to conform to the 1999 presentation.
Under Statement of Financial Accounting Standards No. 128, Earnings Per Share (SFAS No. 128), Dominion Resources computation of diluted earnings per share is the same as basic earnings per share. For more information, see Note (K) to Consolidated Financial Statements.
As discussed in the Dominion Resources' Form 8-K, filed March 29, 1999, Virginia Power discontinued the application of Statement of Financial Accounting Standards No. 71 (SFAS No. 71), Accounting for the Effects of Certain Types of Regulation, to its generation operations. The effect thereof was an after-tax charge of $254.8 million. See Note (C) below.
Segment Reporting
Under SFAS No. 131, Disclosure About Segments of an Enterprise and Related Information, Dominion Resources has defined segments based on product, geographic location and regulatory environment.
In preparation for the transition to competition for electric generation in Virginia, beginning May 1, 1999 Dominion Resources began to evaluate the operating results and financial information across Virginia Power's and Dominion Energy's current organizational structure. Although the employees and assets involved remain with their respective companies, Dominion Resources currently evaluates the operations of Dominion Energy and Virginia Power in the following business segments:
In addition to the business segments mentioned above, Dominion Resources also reviews the following as business segments:
The Corporate Operations category includes:
For more information on business segments, see Note (M) to the Notes to the Consolidated Financial Statements.
DOMINION RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
In May 1999, Dominion Resources filed an application with the Securities and Exchange Commission (SEC) to obtain approval of its merger with Consolidated Natural Gas Company (CNG). CNG is a registered holding company subject to the provisions of the Public Utility Holding Company Act of 1935 (1935 Act). As a result of the merger, Dominion Resources will become a registered public utility holding company under the provisions of the 1935 Act. The 1935 Act imposes a number of restrictions on the operations of registered holding company systems. One such restriction is it limits the ability of registered holding companies to engage in activities unrelated to their utility operations. Consequently, as part of its application with the SEC, Dominion Resources has specified its intentions to divest itself of Dominion Capital, Inc. its financial services subsidiary. Although a formal plan for divestiture has not been adopted, the SEC typically allows two to three years for this to be accomplished.
On June 30, 1999, the shareholders of Dominion Resources and CNG approved the merger agreement between the companies at each company's Special Meeting of Shareholders. Also, the companies have sought necessary state and federal regulatory approvals.
Dominion Resources and CNG announced on August 9, 1999, that they have agreed to divest Virginia Natural Gas, Inc. (VNG), CNG's local gas distribution subsidiary, under an agreement with the Staff of the Virginia Commission. The companies have also greed with the Federal Trade Commission (FTC) to divest VNG. Dominion Resources has one year after the merger is completed to sell VNG to a third party. If the sale of VNG is not completed within the timeframe of one year, VNG will be spun off as an independent company with the common stock distributed to Dominion Resources shareholders. Both deadlines are subject to reasonable extensions, which may be granted by the regulatory authorities.
As of November 12, 1999, all state regulatory commissions and the FTC have approved the merger, subject to certain conditions agreed to by Dominion Resources and CNG. In addition, FERC has voted to conditionally approve the merger. The companies intend to file a response accepting the conditions. The companies' request for approval of the transaction is still pending with the Securities and Exchange Commission.
As discussed below, Virginia Power prospectively changed certain of its accounting policies and estimates, pursuant to the discontinuance of SFAS No. 71, to conform such policies and estimates to those used by non-regulated entitles. The overall impact of these changes was not material to Virginia Power's results of operations and financial condition.
Virginia Power no longer includes an allowance for funds used during construction (AFC) in the cost of property, plant, and equipment constructed for its generation operations. Rather, such costs include, where applicable, interest costs capitalized in accordance with SFAs No. 34, Capitalization of Interest Cost. Virginia Power continues to include AFC, rather than capitalized interest, in the cost of property, plant, and equipment used in its transmission and distribution operations, where permitted by regulating authorities.
Virginia Power no longer provides for the cost of removal in its provision for depreciation of generation related property, as formerly required by regulators. Such costs are expensed as incurred. Also, Virginia Power no longer records retirements of generation related property by charging accumulated depreciation. Rather, Virginia Power records gains and losses upon retirement of such property based upon the difference between proceeds received, if any, and the property's undepreciated basis at the retirement date. In addition, Virginia Power reevaluated the economic useful life estimates of its generation related property in light of the scheduled deregulation of the generation business in Virginia.
DOMINION RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
In 1998, Virginia Power negotiated a settlement with the Virginia State Corporation Commission (Virginia Commission) that resolved then outstanding rate proceedings. As part of the settlement, Virginia Power agreed to a one-time rate refund paid to customers in 1998 and a two-phased rate reduction and base rate freeze through February 2002. For additional information, see Note R to Consolidated Financial Statements included in Dominion Resources' Annual Report on Form 10-K for the year ended December 31, 1998.
In March 1999, the Governor of Virginia signed into law legislation establishing a detailed plan to restructure the electric utility industry in Virginia. Such legislation will deregulate generation by 2002 with the phase-in of retail customer choice beginning at that time. Under this legislation, Virginia Power's base rates will remain generally unchanged until July 2007 and recovery of generation-related costs will continue to be provided through the capped rates. The legislation's deregulation of generation required discontinuation of Statement of Financial Accounting Standards No. 71 for Virginia Power's generation operations in the first quarter of 1999. Virginia Power's transmission and distribution operations continue to meet the criteria for recognition of regulatory assets and liabilities as defined by SFAS No. 71. In addition, fuel expense continues to be subject to deferral accounting.
The effect of discontinuing SFAS No. 71 was an after-tax charge to earnings of $254.8 million. The $254.8 million charge included the write-off of generation-related assets that were not expected to be recovered during the transition period. It also included the write-off of approximately $38 million, after-tax, of deferred investment tax credits.
Also, in conjunction with the discontinuance of SFAS No. 71, Virginia Power reviewed its utility plant assets and long-term power purchase contracts for possible impairment. No impairments were recorded based on Virginia Power's analyses, which were highly dependent on the underlying assumptions. Significant estimates were required in recording the effect of the deregulation legislation, including the fair value determination for generating facilities and estimated purchases under long-term power purchase contracts.
Virginia Power remains subject to numerous risks including, among others, exposure to long-term power purchase commitment losses, environmental contingencies, changes in tax laws, decommissioning costs, inflation, increased capital costs, and recovery of certain other items. Management believes the stable rates that are provided until July 2007 by the 1999 legislation present a reasonable opportunity to recover a substantial portion of Virginia Power's potentially stranded costs as more fully described in Dominion Resources' 1998 Annual Report on Form 10-K in Competition--Exposure to Potentially Stranded Costs, Management's Discussion and Analysis of Financial Condition and Results of Operations. See also Note (B) to Consolidated Financial Statements included in Dominion Resources' Form 10-Q for the period ended March 31, 1999 for further discussion of the impact of the discontinuation of SFAS No. 71 and impairment review.
(D) PROVISION FOR INCOME TAXES
Income before provision for income taxes, classified by source of income, and before minority interest was as follows:
Three Months Ended |
Nine Months Ended |
|||
1999 |
1998 |
1999 |
1998 |
|
(Millions) |
||||
U.S. |
$342.7 |
$285.8 |
$713.7 |
$331.7 |
Non U.S. |
14.7 |
379.7 |
29.6 |
443.4 |
Total |
$357.4 |
$665.5 |
$743.3 |
$775.1 |
DOMINION RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The statutory U.S. federal income tax rate reconciles to the effective income tax rates as follows:
|
Three MonthsEnded September 30, |
Nine Months Ended September 30, |
||
1999 |
1998 |
1999 |
1998 |
|
|
Percents |
|||
U.S. statutory rate |
35.0 |
35.0 |
35.0 |
35.0 |
Utility plant differences |
(0.2) |
0.9 |
0.3 |
3.1 |
Amortization of investment tax credits |
(1.0) |
(0.6) |
(1.5) |
(1.6) |
Preferred dividends of Virginia Power |
0.9 |
0.5 |
1.3 |
1.2 |
Nonconventional fuel credit |
(2.7) |
(1.0) |
(3.7) |
(2.4) |
Benefits and taxes related to foreign operations |
1.4 |
(2.8) |
0.1 |
(4.5) |
State taxes, net of federal benefit |
0.8 |
0.2 |
1.4 |
1.0 |
Other, net |
(0.4) |
3.1 |
(0.5) |
2.9 |
Effective tax rate |
33.8 |
35.3 |
32.4 |
34.7 |
The effective income tax rate includes state and foreign income taxes.
(E) COMMON STOCK
At September 30, 1999, there were 300,000,000 shares of Dominion Resources common stock authorized of which 190,882,545 were issued and outstanding. Common shares issued and purchased during the referenced periods were as follows:
|
Three Months Ended |
Nine Months Ended |
||
|
1999 |
1998 |
1999 |
1998 |
Employee Savings Plans |
|
38,458 |
|
437,814 |
Dominion Direct Investment |
|
107,884 |
|
1,695,238 |
Public Offering |
|
|
|
6,775,000 |
Stock Repurchase |
(1,097,000) |
(1,359,000) |
(3,715,700) |
(1,359,000) |
Other |
_________ |
67,742 |
140,139 |
14,727 |
Total Shares |
(1,097,000) |
(1,144,916) |
(3,575,561) |
7,563,779 |
On July 20, 1998, the Dominion Resources Board of Directors authorized the repurchase of up to $650 million (approximately 8 percent) of Dominion Resources common stock outstanding. As of September 30, 1999, Dominion Resources has repurchased $257.8 million of common stock and continues to monitor market conditions for opportunities to repurchase additional shares.
Also, effective August 1, 1998, shares required by Dominion Direct Investment and the Employee Savings Plans are being acquired on the open market instead of issuing new shares.
(F) PREFERRED STOCK - VIRGINIA POWER
As of September 30, 1999, 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 10,000,000 authorized shares of Virginia Power's preferred stock.
Of the 1,800,000 issued and outstanding shares of preferred stock subject to mandatory redemption, 400,000 shares are scheduled to be redeemed in March 2000 and the remaining 1,400,000 shares are scheduled to be redeemed in September 2000. Accordingly, Virginia Power has classified the $180 million of preferred stock subject to mandatory redemption in Securities Due Within One Year at September 30, 1999.
DOMINION RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(G) COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES
In December 1997, Dominion Resources established Dominion Resources Capital Trust I (DR Capital Trust). DR Capital Trust sold 250,000 shares of capital securities for $250 million, representing preferred beneficial interests and 97% beneficial ownership in the assets held by DR Capital Trust.
Dominion Resources issued $257.7 million of 7.83% Junior Subordinated Debentures (Debentures) in exchange for the $250 million realized from the sale of the capital securities and $7.7 million of common securities of DR Capital Trust. The common securities, which are held by Dominion Resources, represent the remaining 3% beneficial ownership interest in the assets held by DR Capital Trust. The Debentures constitute 100 percent of DR Capital Trust's assets.
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 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 million realized from the sale of the preferred securities and $4.2 million of common securities of VP Capital Trust. The common securities, which are held by Virginia Power, 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.
(H) RECENTLY ISSUED ACCOUNTING STANDARDS
The Financial Accounting Standards Board (FASB) recently issued SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities--Deferral of the Effective Date of FASB Statement No. 133, which defers the effective date of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. As a result, Dominion Resources must adopt SFAS No. 133 no later than January 1, 2001. SFAS No. 133 requires that derivative instruments (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at fair value. The statement requires that changes in a derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met.
The FASB-sponsored Derivatives Implementation Group that is addressing implementation issues related to SFAS No. 133 has tentatively concluded that certain long-term power purchase contracts may be considered derivatives under SFAS No. 133. Dominion Resources has not yet quantified the impacts of adopting SFAS No. 133 and has not yet determined the timing of, or method of, adoption.
(I) CONTINGENCIES
VIRGINIA POWER
Nuclear Insurance
The Price-Anderson Act limits the public liability of an owner of a nuclear power plant to $9.7 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 (T) to the Notes to the Consolidated Financial Statements included in Dominion Resources' Annual Report on Form 10-K for the year ended December 31, 1998.
DOMINION RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Environmental Matters
In 1987, the Environmental Protection Agency (EPA) has identified Virginia Power and several other entities as Potentially Responsible Parties (PRPs) at two Superfund sites located in Kentucky and Pennsylvania. Current cost stuties estimate total remediation costs for the sites to range from $106.0 million to $156.1 million. Virginia Power's proportionate share of the total cost is expected to be in the range of $1.7 million to $2.8 million, based upon allocation formulas and the volume of waste shipped to the sites. Virginia Power has 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.
Virginia Power generally seeks to recover its costs associated with environmental remediation from third party insurers. At September 30, 1999, any pending or possible claims were not recognized as an asset or offset against such obligations of Virginia Power.
In April 1999, Virginia Power was notified by the Department of Justice of alleged noncompliance with the EPA's oil spill, prevention, control and countermeasures (SPCC) plans and facility response (FRP) requirements at one of its power stations. If, in a legal proceeding, such instances of noncompliance are deemed to have occurred, Virginia Power may be required to remedy any alleged deficiencies and pay civil penalties. Settlement of this matter is currently in negotiation and is not expected to be material to Virginia Power's financial condition or results of operations.
In August 1999, Virginia Power identified matters at certain other power stations that the EPA might view as not in compliance with the SPCC and FRP requirements. Virginia Power, reported these matters to the EPA and its plan for correction. Presently, the EPA has not assessed any penalties against Virginia Power, pending its review of Virginia Power's disclosure information. Future resolution of these matters is not expected to have a material impact on Virginia Power's financial condition or results of operations.
DOMINION RESOURCES AND ITS NONUTILITY SUBSIDIARIES
Dominion Resources
DR Group Holdings Guarantee
On October 30, 1998, DR Group Holdings entered into a revolving credit agreement with Bayerische Landesbank Girozentrale. The total commitment and outstanding balance of the agreement is 33.5 million pounds sterling ($55.2 million at September 30, 1999). Dominion Resources is guarantor to DR Group Holdings for this revolving credit agreement.
Dominion Energy
Subsidiaries of Dominion Energy have general partnership interests in certain of its energy ventures. These subsidiaries may be required to fund future operations of these investments, if operating cash flow is insufficient.
Dominion Capital
As of September 30, 1999, Dominion Capital had commitments to fund loans of approximately $818.7 million.
For additional information regarding Contingencies, see Note (T) to the Notes to the Consolidated Financial Statements included in Dominion Resources' Annual Report on Form 10-K for the year ended December 31, 1998.
DOMINION RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(J) LINES OF CREDIT
Dominion Resources and its subsidiaries have lines of credit, revolving credit agreements and bank commitments that provide for maximum borrowings of $5,058.6 million. At September 30, 1999, $2,359.1 million had been borrowed under such agreements. In addition, these credit agreements supported $523.5 million of Dominion Resources' commercial paper and $693.1 million of non-recourse commercial paper issued by Dominion Resources' subsidiaries which was outstanding at September 30, 1999. At September 30, 1999, $363.6 million of Dominion Resources and its subsidiaries commercial paper is classified as long-term debt since it is supported by revolving credit agreements that have expiration dates extending beyond one year.
(K) LONG-TERM INCENTIVES
1999 Option Awards:
During the first nine months of 1999, Dominion Resources has awarded 7,146,383 nonqualified stock options under its Incentive Compensation Plan to employees and directors of Dominion Resources, Virginia Power and Dominion Energy. The weighted-average exercise price of the options is $41.375 at September 30, 1999. The total number of shares available under this plan is 11 million. The following table provides the grant date, amount, exercise price, and expiration dates of the awards. The exercise price for the options is equal to the market price of Dominion Resources common stock on the date of the grant. As a result of a change adopted in September 1999, these stock options will vest on January 1, 2000.
Date of |
Amount of |
Exercise |
Expiration |
Award |
Options Awarded |
Price |
Date |
5/17/99 |
6,939,000 |
$41.25 |
5/17/09 |
7/12/99 |
65,000 |
$43.625 |
7/12/09 |
9/15/99 |
78,300 |
$46.375 |
9/15/09 |
9/20/99 |
64,083 |
$46.5625 |
9/20/09 |
Accounting Treatment:
In 1995, FASB issued SFAS No. 123, Accounting for Stock Based Compensation. Under SFAS No. 123, compensation cost is measured at the grant date based on the fair value of the award and is recognized over the service (or vesting) period. However, as permitted under SFAS No. 123, the company instead measures compensation cost in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees and related interpretations. Under this standard, compensation cost is measured as the difference between the market price of the company's common stock and the exercise price of the option at the grant date. Accordingly, no compensation expense has been recognized for the stock option grants.
Had compensation cost associated with the stock options been determined under SFAS No. 123 based on the fair market value at the grant date, such cost , net of related income taxes, would have been approximately $3.6 million for the three month period and $5.4 million for the nine month period ended September 30, 1999. Basic earnings per share for the three-month and nine-month periods ended September 30, 1999, would have decreased by $0.02 and $0.03, respectively, due to the issuance of the stock options. Fully diluted earnings per share for both the three and nine-month periods ended September 30, 1999, would not have been affected.
The fair value of the options was estimated on the date of grant using the Black-Scholes option pricing model. The following assumptions were used:
DOMINION RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The weighted-average grant-date fair value of options granted during the nine-month period September 30, 1999 is $4.11.
Previous Option Awards:
For the nine-month period ended September 30, 1999, 1,013 shares were issued associated with exercised stock options from previous awards. These previous awards were made under the Dominion Resources' Long-Term Incentive Plan, which expired in 1997 and was replaced with the Dominion Resources Incentive Compensation Plan. As of September 30, 1999, options on 1,113 shares were exercisable from previous awards under the Dominion Resources Long-Term Incentive Plan.
Other Stock Awards:
In addition, during the first nine months of 1999, the Board of Directors of Dominion Resources awarded certain participants in the Dominion Resources, Inc. Incentive Compensation Plan 5,000 shares of common stock at $44.50 per share, 13,916 shares of restricted stock at $44.50 per share and 10,842 shares of restricted stock at $46.75 per share.
As mentioned in Dominion Resources' Form 10-Q for the quarter ended June 30, 1999, Dominion Energy had reached an agreement on August 1, 1999, to sell its interests in approximately 1,200 megawatts of gross generation capacity located in Latin America. Duke Energy International is purchasing the interests for approximately $405 million. Dominion Energy completed the sale of its interests in Belize and Peru on November 1, 1999 and expects to complete the sale of its interests in Argentina and Bolivia in 2000, following receipt of certain regulatory approvals.
During the third quarter of 1999, Dominion Energy adjusted the carrying amount of the Latin American interests to be sold to Duke Energy International and recognized an impairment loss of $18.1 million, including the effect of applicable income taxes. The pretax loss of $14.4 million was recorded in Other Operation and Maintenance and the income tax effect of $3.7 million was recorded in Provision for Income Taxes on Dominion Resources' Consolidated Statements of Income.
The results of operations for the Latin American interests are as follows:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
||
(millions) |
1999 |
1998 |
1999 |
1998 |
Net Income |
$4.3 |
$4.1 |
$6.8 |
$15.4 |
DOMINION RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(M) BUSINESS SEGMENTS
Business segment financial information follows for the three month and nine month periods ended September 30, 1999 and 1998.
|
Virginia Power Wires Business |
Dominion Capital |
Dominion Generation |
Dominion UK |
Dominion Energy - Gas Operations |
Corporate Operations |
Consolidated Total |
(millions, except total assets) |
|
|
|
|
|
|
|
Three Months Ended September 30 , |
|
|
|
|
|
|
|
1999 |
|
|
|
|
|
|
|
Revenues |
$354.6 |
$91.7 |
$1,139.0 |
|
$67.7 |
$9.5 |
$1,662.5 |
Net income (loss) |
$63.5 |
$7.2 |
$155.6 |
|
$11.9 |
$(6.1) |
$232.1 |
Total assets (billions) |
$4.6 |
$3.6 |
$8.8 |
|
$1.2 |
$0.2 |
$18.4 |
|
|
|
|
|
|
|
|
1998 |
|
|
|
|
|
|
|
Revenues |
$329.1 |
$95.1 |
$1,072.8 |
|
$42.2 |
$5.1 |
$1,544.3 |
Net income (loss) |
$72.7 |
$10.4 |
$135.3 |
$200.7 |
$7.2 |
$(1.7) |
$424.6 |
Total assets at 12/31/98 (billions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
|
|
|
|
|
1999 |
|
|
|
|
|
|
|
Revenues |
$905.5 |
$320.1 |
$2,844.7 |
|
$179.5 |
$21.0 |
$4,270.8 |
Net income (loss) |
$151.2 |
$43.1 |
$271.4 |
|
$32.4 |
$(264.9) |
$233.2 |
|
|
|
|
|
|
|
|
1998 |
|
|
|
|
|
|
|
Revenues |
$867.2 |
$306.1 |
$2,740.3 |
$934.8 |
$119.1 |
$ (64.5) |
$4,903.0 |
Net income (loss) |
$143.1 |
$56.1 |
$245.0 |
$227.2 |
$19.2 |
$(209.2) |
$481.4 |
DOMINION RESOURCES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of Operations contains "forward-looking statements" as defined by the Private Securities Litigation Reform Act of 1995, including (without limitation) discussions as to expectations, beliefs, plans, objectives and future financial performance, or assumptions underlying or concerning matters discussed in this document. These discussions, and any other discussions, including certain contingency matters (and their respective cautionary statements) discussed elsewhere in this report, that are not historical facts, are forward-looking and, accordingly, involve estimates, projections, goals, forecasts, assumptions and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements.
The business and financial condition of Dominion Resources are influenced by a number of factors including political and economic risks, market demand for energy, inflation, capital market conditions, governmental policies, legislative and regulatory actions (including those of the Federal Energy Regulatory Commission (FERC), the Securities and Exchange Commission (SEC), the Environmental Protection Agency, the Department of Energy, the Nuclear Regulatory Commission, the Virginia Commission and the North Carolina Utilities Commission), industry and rate structure and legal and administrative proceedings. Some other important factors that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements include changes in and compliance with environmental laws and policies, weather conditions and catastrophic weather-related damage, present or prospective wholesale and retail competition, competition for new energy development opportunities, pricing and transportation of commodities, operation of nuclear power facilities, acquisition and disposition of assets and facilities, effects of the merger with CNG, recovery of the cost of purchased power, nuclear decommissioning costs, the ability of Dominion Resources, its suppliers, and its customers to successfully address Year 2000 readiness issues, exposure to changes in the fair value of commodity contracts, counter-party credit risk and unanticipated changes in operating expenses and capital expenditures. All such factors are difficult to predict, contain uncertainties that may materially affect actual results, and may be beyond the control of Dominion Resources. New factors emerge from time to time and it is not possible for management to predict all such factors, nor can it assess the impact of each such factor on Dominion Resources.
Any forward-looking statement speaks only as of the date on which such statement is made, and Dominion Resources undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made.
Business Segments
In preparation for the transition to competition for electric generation in Virginia, beginning May 1, 1999 Dominion Resources began to evaluate the operating results and financial information across Virginia Power's and Dominion Energy's current organizational structure. Although the employees and assets involved remain with their respective companies, Dominion Resources currently evaluates the operations of Dominion Energy and Virginia Power in the following business segments:
In addition to the business segments mentioned above, Dominion Resources also reviews the following as business segments:
DOMINION RESOURCES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Dominion Resources has structured its Management's Discussion and Analysis of Financial Condition and Results of Operations to reflect the above mentioned business segments.
Certain activities discussed under Liquidity and Capital Resources are currently evaluated based on existing legal entities rather than the operating segments defined by the new organizational structure because we continue to analyze these matters internally by legal entity.
RESULTS OF OPERATIONS
We have organized our discussion of Results of Operations into the following subsections:
1. DOMINION RESOURCES - CONSOLIDATED
Earnings Per Share
|
Three Months Ended |
Nine Months Ended |
||
|
1999 |
1998 |
1999 |
1998 |
Virginia Power-Wires Business |
$0.33 |
$0.37 |
$ 0.79 |
$ 0.73 |
Dominion Generation |
0.81 |
0.69 |
1.41 |
1.26 |
Dominion Capital |
0.04 |
0.05 |
0.22 |
0.29 |
Dominion Energy-Gas Operations |
0.06 |
0.04 |
0.17 |
0.10 |
Dominion UK |
0.00 |
1.03 |
0.00 |
1.17 |
Corporate Operations |
(0.03 ) |
(0.01) |
(1.38 ) |
(1.08 ) |
Consolidated |
$1.21 |
$2.17 |
$ 1.21 |
$ 2.47 |
The results of operations for the interim periods are not necessarily indicative of the results expected for the full year. Information for quarterly periods is affected by seasonal variations in sales, rate changes, timing of fuel expense recovery and other factors.
Consolidated earnings decreased $0.96 per share for the third quarter of 1999 when compared to the same time period in 1998. The decrease was primarily due to:
The decrease in earnings was offset by the performance of Dominion Generation's energy marketing business. The performance was attributable to changes in the composition and the fair value of its portfolio of commodity contracts as well as the settlement of commodity contract liabilities using Dominion Generation resources rather than market purchases.
DOMINION RESOURCES, INC
.ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Consolidated earnings decreased by $1.26 per share during the first nine months of 1999 as compared to the same period in 1998 primarily due to:
The effects of these transactions were offset by the performance of Dominion Generation's energy marketing business during the first nine months of 1999, explained above, and the impairment of regulatory assets and one-time base rate refund resulting from the settlement of Virginia Power's Virginia jurisdictional rate proceedings in the second quarter of 1998. See Note (C) to Consolidated Financial Statements.
Operating Income
Operating income increased by $212.3 million during the first nine months of 1999 as compared to the same period in 1998, primarily due to the recording of the impairment of regulatory assets and one-time rate refund recorded in the second quarter of 1998 associated with the rate settlement with the Virginia Commission. See Note (C) to Consolidated Financial Statements. The increase was offset by the absence of Dominion UK's East Midlands operations which was sold in the third quarter of 1998.
Interest Charges, Net
Interest charges, net decreased by $94.2 million during the nine-month period ended September 30, 1999, as compared to the same period in 1998 primarily due to the absence of East Midlands debt because of the sale of East Midlands in the third quarter of 1998.
Extraordinary Item, Net of Tax
Extraordinary item, net of tax consists of a charge to earnings for the write-off of assets and liabilities related to Virginia Power's generation activities which will not be recovered through capped regulated rates. For more information on the extraordinary item, see Note (C) to Consolidated Financial Statements.
Provision for Income Taxes
The Provision for Income Taxes in the third quarter and nine months ended September 30, 1999 decreased when compared to the same periods in 1998, primarily due to the recording of related income taxes associated with the sale of East Midlands in July 1998.
2. VIRGINIA POWER - WIRES BUSINESS
The business segment Virginia Power-Wires Business includes customer service, bulk power transmission, distribution and metering services that continue to be subject to cost-based regulation.
Net income for the three months ended September 30, 1999, decreased as compared to the same period in 1998,
primarily due to increased service restoration costs associated with hurricane damage. For the nine months ended
September 30, 1999, net income increased as compared to the same period in 1998 due to increased revenues for electric transmission services and from customer growth, offset in part by increased expenses associated with ice storm and hurricane damage during the first and third quarters of 1999.
DOMINION RESOURCES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
3. DOMINION GENERATION
The business segment Dominion Generation consists of the combined generation operations of Dominion Energy and Virginia Power.
Operating Revenue and Income
Operating revenues and income increased for the third quarter and first nine months of 1999 when compared to the same periods in 1998 primarily due to changes in the composition and the fair value of Dominion Generation's portfolio of commodity contracts as well as the settlement of commodity contract liabilities using company resources rather than market purchases.
Operating Expenses
Operating expenses for the nine month period ended September 30, 1999 as compared to the same period in 1998, increased primarily due to:
4. DOMINION ENERGY - GAS OPERATIONS
The business segment Dominion Energy - Gas Operations consists of the gas and oil operations of Dominion Energy.
Increases in the results of operations for the three month and nine month periods ended September 30, 1999, as compared to the same periods in 1998, resulted primarily from the effects of higher oil and gas production. This incremental production was related to increased reserves obtained through acquisition activities.
5. DOMINION CAPITAL
The business segment Dominion Capital's net income decreased during the third quarter and first nine months of 1999, as compared to the same periods in 1998, primarily due to the timing of net investment gains in 1998, partially offset by a higher earnings contribution from the financial services operations in 1999.
LIQUIDITY AND CAPITAL RESOURCES
We have organized our discussion of Liquidity and Capital Resources into the following subsections:
1. DOMINION RESOURCES - CONSOLIDATED
Cash Flows From Financing Activities
Financing activities provided cash flows of $464.7 million during the first nine months of 1999 resulting primarily from the issuance of commercial paper and long-term debt offset by the repurchase of common stock and the payment of common stock dividends.
On October 15, 1999, the Board of Directors of Dominion Resources declared a quarterly common stock dividend of $0.645 per share, payable December 20, 1999, to holders of record at the close of business November 26, 1999.
DOMINION RESOURCES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
On July 20, 1998, the Dominion Resources Board of Directors approved the repurchase of up to $650 million of Dominion Resources common stock. Under this program, Dominion Resources repurchased 3,715,700 shares of common stock ($159.2 million) during the first nine months of 1999.
On March 31, 1999, Dominion Resources increased its bank lines of credit to $600 million by replacing the April 1, 1998, $200 million short-term credit agreement with a new $300 million, 364-day facility. Dominion Resources uses these credit agreements to support its commercial paper borrowings. The proceeds from these borrowings are used to finance Dominion Resources nonutility subsidiaries' working capital for operations.
Cash Flows Used In Investing Activities
Net cash flows used in investing activities during the first nine months of 1999 were $1,368.5 million. The primary reasons for the cash outflows were:
2. VIRGINIA POWER
Cash Flows From Operations
Operating activities resulted in $62.9 million decreased cash flow for the nine months ended September 30, 1999 as compared to the same period in 1998. This decrease reflects primarily the timing of payments of accounts payable and certain other expenses. Internal generation of cash at Virginia Power exceeded capital requirements during the first nine months of 1999 and 1998.
Cash Flows Used in Financing Activities
Cash used in financing activities was as follows:
|
Nine Months Ended |
|
|
1999 |
1998 |
|
(Millions) |
|
Issuance of long-term debt |
$ 230.0 |
$ 150.0 |
Issuance (repayment) of short-term debt, net |
35.9 |
(148.7) |
Repayment of long-term debt |
(332.7) |
(292.5) |
Common dividend payments |
(285.5) |
(285.7) |
Other |
(13.4) |
(12.9) |
Total |
$(365.7) |
$(589.8) |
In June 1999, Virginia Power issued $150 million in aggregate principal of unsecured Senior Notes, Series 1999-A, with an annual coupon rate of 6.7%, due June 30, 2009; and $80 million of Medium-Term Notes, Series G, with an annual coupon rate of 6.3%, due June 21, 2001.
During the first nine months of 1999, Virginia Power retired $309 million in aggregate principal amount of mandatory debt maturities. In July 1999, Virginia Power repurchased $23.7 million in aggregate principal amount of First and Refunding Mortgage Bonds that were made available through the open market.
DOMINION RESOURCES, INC
.ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
As of September 30, 1999, Virginia Power has available for its use to meet capital requirements $915 million of remaining principal amount under its currently effective shelf registrations with the Securities and Exchange Commission.
Virginia Power has a commercial paper program that is supported by two credit facilities totaling $500 million. Proceeds from the sale of commercial paper are primarily used to provide working capital. Net borrowings under the program were $257.6 million at September 30, 1999.
On November 1, 1999, Virginia Power issued $75 million in aggregate principal of unsecured Senior Notes, Series 1999-B, with an annual coupon rate of 7.2%, due November 1, 2004.
Cash Flows Used in Investing Activities
Cash used in investing activities was as follows:
|
Nine Months Ended |
|
|
1999 |
1998 |
|
(Millions) |
|
Plant expenditures |
$(452.8) |
$(300.6) |
Nuclear fuel |
(39.4) |
(70.2) |
Nuclear decommissioning contributions |
(19.9) |
(37.5) |
Other |
(5.1 ) |
(3.7) |
Total |
$(517.2) |
$(412.0) |
Investing activities for the first nine months of 1999 resulted in a net cash outflow of $517.2 million primarily due to $452.8 million of plant expenditures, $39.4 million of nuclear fuel expenditures and $19.9 million of contributions to nuclear decommissioning trusts. Of the construction expenditures, Virginia Power spent approximately $231.3 million on Virginia Power - Wires Business projects and $221.5 million on Dominion Generation utility projects, including additional capacity and environmental upgrades.
3. DOMINION ENERGY
Cash Flows From Operating Activities
Cash flows from operations for the nine months ended September 30, 1999 decreased by $31.3 million, as compared to the same period in 1998, primarily due to timing of payments from normal business operations.
Cash Flows From Financing Activities
Cash from (used in) financing activities was as follows:
|
Nine Months Ended |
|
|
1999 |
1998 |
|
(Millions) |
|
Issuance of long-term debt |
$ 46.2 |
$409.2 |
Investment from parent |
115.0 |
|
Dividend payment |
(47.0) |
(35.9) |
Issuance of intercompany debt |
206.8 |
|
Other |
(29.1 ) |
12.1 |
Total |
$291.9 |
$385.4 |
DOMINION RESOURCES, INC
.ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
During the first nine months of 1999, cash flows from financing activities were $291.9 million primarily due to intercompany borrowings and an equity contribution from Dominion Resources. Proceeds were used primarily to fund the Remington Energy, Ltd. and San Juan Partners, LLC acquisitions which expanded Dominion Energy's natural gas exploration, development and production operations. Also, Dominion Energy borrowed funds to expand and upgrade its independent power plants.
Cash Flows Used In Investing Activities
Cash from (used in) investing activities was as follows:
|
Nine Months Ended |
|||||||
|
1999 |
1998 |
||||||
|
(Millions) |
|||||||
Investment in natural gas assets |
$(42.7) |
$(25.2) |
||||||
Investment in power generation assets |
(88.8) |
(42.9) |
||||||
Acquisition of business |
(166.6) |
(339.0) |
||||||
Sale of business |
|
52.7 |
||||||
Nonutility capital expenditures |
(63.0) |
(70.4) |
||||||
Investment in affiliates |
(62.3) |
0.5 |
||||||
Other |
16.3 |
(31.4) |
||||||
Total |
$(407.1) |
$(455.7) |
During the first nine months of 1999, cash flows used in investing activities were $407.1 million primarily due to the following:
4. DOMINION CAPITAL
Cash Flows Used In Operating Activities
Dominion Capital's cash flows used in operations for the nine months ended September 30, 1999 decreased by $166.4 million as compared to the same period for 1998 primarily due to a decrease in mortgage originations, net of sales and principal collections.
DOMINION RESOURCES, INC
.ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Cash Flows From Financing Activities
Cash from financing activities was as follows:
|
Nine Months Ended |
|||
|
1999 |
1998 |
||
|
(Millions) |
|||
Issuance of long-term debt |
$ 3,213.1 |
$2,293.1 |
||
Repayment of long-term debt |
(3,285.0) |
(1,924.9) |
||
Issuance of commercial paper |
606.3 |
368.1 |
||
Investment from parent |
75.0 |
99.1 |
||
Dividend payment |
(53.4) |
(38.9) |
||
Issuance (repayment) of intercompany debt |
(110.9) |
50.8 |
||
Other |
______ |
0.1 |
||
Total |
$ 445.1 |
$ 847.4 |
During the first nine months of 1999, Dominion Capital's cash flows from financing activities were $445.1 million due to funding needs for loan originations and purchase and originations of mortgages.
Cash Flows Used In Investing Activities
Cash used in investing activities was as follows:
|
Nine Months Ended |
||
|
1999 |
1998 |
|
|
(Millions) |
||
Loan originations |
$(1,818.9) |
$(1,958.2) |
|
Repayments of loan originations |
1,526.3 |
1,386.0 |
|
Purchase of securities |
(102.1) |
(27.2) |
|
Proceeds from sale of securities |
121.7 |
34.3 |
|
Other investments |
(73.7) |
15.3 |
|
Other |
(43.3 ) |
(20.2) |
|
Total |
$ (390.0 ) |
$ (570.0 ) |
During the first nine months of 1999, Dominion Capital's cash flows used in investing activities were $390 million primarily due to the funding for commercial lending activities.
Contingencies
For information on contingencies, see Note (I) to Consolidated Financial Statements.
DOMINION RESOURCES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
FUTURE ISSUES
DOMINION RESOURCES - CONSOLIDATED
CNG Merger
On June 30, 1999, shareholders of Dominion Resources and CNG approved the merger agreement between the companies at each company's Special Meeting of Shareholders.
Dominion Resources and CNG announced on August 9, 1999, that they have agreed to divest Virginia Natural Gas, Inc. (VNG), CNG's local gas distribution subsidiary, under an agreement with the Staff of the Virginia Commission. The companies have also greed with the Federal Trade Commission (FTC) to divest VNG. Dominion Resources has one year after the merger is completed to sell VNG to a third party. If the sale of VNG is not completed within the timeframe of one year, VNG will be spun off as an independent company with the common stock distributed to Dominion Resources shareholders. Both deadlines are subject to reasonable extensions, which may be granted by the regulatory authorities.
As of November 12, 1999, all state regulatory commissions and the FTC have approved the merger, subject to certain conditions agreed to by Dominion Resources and CNG. In addition, FERC has voted to conditionally approve the merger. The companies intend to file a response accepting the conditions. The companies' request for approval of the transaction is still pending with the Securities and Exchange Commission.
Power Generation Development
On April 14, 1999, Dominion Resources and a subsidiary of CNG signed an agreement to develop natural gas-fired power generation facilities along CNG's natural gas pipeline system. This agreement is not conditional upon the proposed merger between Dominion Resources and CNG.
Under terms of the agreement the companies have identified a number of potential development sites along CNG's natural gas pipeline network in Ohio, Pennsylvania, New York, West Virginia and Virginia. Dominion Resources and CNG affiliates will develop, own, operate and maintain the facilities on a 50-50 ownership basis.
VIRGINIA POWER
Competition
On March 25, 1999, the Governor of Virginia signed into law legislation establishing a detailed plan to restructure the electric utility industry in Virginia which will provide for customer choice beginning in 2002. Under this legislation, Virginia Power's base rates will remain unchanged until July 2007 and recovery of generation-related costs will continue to be provided through capped rates and wires charges assessed to those customers opting for alternate suppliers. In the absence of capped rates, Virginia Power would be exposed, on a pre-tax basis, to approximately $3.2 billion of potential losses related to long-term power purchase commitments.
The legislation's deregulation of generation is an event that required discontinuation of SFAS No. 71 for Virginia Power's generation operations. Virginia Power's transmission and distribution operations continue to meet the criteria for recognition of regulatory assets and liabilities as defined by SFAS No. 71. In addition, cost-based recovery of fuel expenses continues until July 2007.
DOMINION RESOURCES, INC
.ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Virginia Power is subject to a base rate freeze at reduced revenue levels until July 2007. In addition, Virginia Power remains subject to numerous risks including, among others, exposure to long-term power purchase commitment losses, environmental contingencies, changes in tax laws, decommissioning costs, inflation, increased capital costs, and recovery of certain other items. Virginia Power believes the stable rates that are provided until July 2007 by the legislation present a reasonable opportunity to recover a substantial portion of Virginia Power's potentially stranded costs as more fully described in Dominion Resources' 1998 Form 10-K. See Competition--Exposure to Potentially Stranded Costs, Management's Discussion and Analysis of Operations.
For additional information, see Note (C) to Consolidated Financial Statements and, Part II, Item 5. Other Information, Virginia Power-Regulation.
North Carolina Rates
In support of the request of Dominion Resources for approval by the North Carolina Utilities Commission of its proposed merger with Consolidated Natural Gas Company, Virginia Power and Dominion Resources reached an agreement with the Public Staff of the North Carolina Utilities Commission. As part of the agreement, Virginia Power agreed not to request an increase in North Carolina retail electric base rates until after December 31, 2005, except for certain events that would have a significant financial impact on Virginia Power. Such events could include any governmental action or an occurrence that is beyond Virginia Power's control and not attributable to Virginia Power's fault or negligence. However, fuel rates are still subject to change under the annual fuel cost adjustment proceedings. The North Carolina Utilities Commission approved the merger, subject to conditions agreed to by Dominion Resources and Virginia Power, on October 18, 1999.
Clean Air Act Matters
On November 8, 1999 and September 21, 1999, Virginia Power received notices from the Attorney General of the States of Connecticut and New York, respectively, of their intention to file suit against Virginia Power for alleged violations of the Clean Air Act. The notices question whether modifications at certain Virginia Power generating facilities were properly permitted under the Clean Air Act and allege that emissions from these facilities have contributed to damage to public health and the environment in the Northeast. To date, no suits have been filed. Virginia Power believes, based on newspaper reports and other sources, that Virginia Power is one of a number of companies with fossil fuel power generating stations in the southeast and central U.S. to have received such notifications. Virginia Power believes that it has obtained the permits necessary in connection with its generating facilities and that suits, if any, filed by the Attorney Generals would not have a material adverse effect on Virginia Power's financial condition or results of operations.
DOMINION ENERGY
Sale of Power
In April 1999, Elwood Energy LLC (Elwood Energy), a joint venture between subsidiaries of Dominion Energy and Peoples Energy Corporation, signed agreements with Commonwealth Edison Company (ComEd) and Engage Energy US, L.P. (Engage) to sell all generating capacity from its natural gas-fired facility. Under the agreements, ComEd and Engage have each contracted for one-half of the generating capacity of Elwood Energy. In July 1999, Elwood Energy began commercial operations.
Sale of Latin American Interests
For information on Dominion Energy's sale of its interests in Latin American generating capacity to Duke Energy International, see Note (L) to Consolidated Financial Statements.
DOMINION RESOURCES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
DOMINION CAPITAL
As reported in the merger proxy sent to shareholders of both companies, Dominion Resources expects to divest its financial services subsidiary, Dominion Capital. However, no formal plan of disposal has been adopted, see Note (B) to Consolidated Financial Statements.
YEAR 2000 COMPLIANCE
DOMINION RESOURCES CONSOLIDATED
Dominion Resources remains on schedule to complete all necessary work to prepare the company and its subsidiaries for the year 2000. The following table summarizes our status and projected timetable:
|
Percent of Critical Systems Year 2000 Ready |
|||
|
Actual |
Planned |
||
|
7/31/99 |
9/30/99 |
12/31/99 |
|
Virginia Power |
99% |
99% |
100% |
|
Dominion Resources |
75% |
75%* |
100% |
|
Dominion Energy |
84% |
100% |
100% |
|
Dominion Capital |
100% |
100% |
100% |
* Dominion Resources previously planned to be 100% complete by July 31, 1999. Because of the pending merger with CNG , the decision to replace the existing cash management system was delayed. Remediation and testing of the system was completed on November 10, 1999, therefore obtaining 100% year 2000 readiness.
Dominion Resources expects year 2000 costs to be within the range of $30 million to $40 million of which $28 million to $33 million relates to Virginia Power.
Actual year 2000 costs of $28.1 million have been expended as of September 30, 1999. Substantially all expenses not yet incurred relate to contingency planning, communications activities, remediation of non-critical systems and continued remediation validation.
In addition to our remediation programs directed at our critical information systems, embedded systems and external relationships, our year 2000 readiness efforts include evaluation of reasonably likely worst case scenarios and the development of contingency plans to address how we would respond to problems, should they occur. Our contingency planning efforts to support continuity of operations into and beyond the year 2000 are complete. These plans will continue to be refined and validated throughout the remainder of 1999.
As part of our contingency planning process, we have considered and evaluated, and continue to evaluate, reasonably likely worst case scenarios and their impact on critical business processes. Based on our evaluations, such potential scenarios could include the following:
DOMINION RESOURCES, INC
.ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
When considering these scenarios or others specifically related to Virginia Power, Dominion Resources takes into account that Virginia Power, and the entire electric power industry, already have extensive contingency plans in place for many events such as extreme temperatures, storms, equipment failures, sudden loss of customer load or sudden loss of a generation unit. Year 2000 contingency planning is an extension of these existing plans.
Year 2000 contingency plans address the scenarios recommended in the North American Electric Reliability Council Year 2000 Contingency Planning Guide, as well as additional company specific scenarios. For example, one contingency plan prescribes that in the event voice communications fail, satellite phones will be used to provide operational information to our operations center and to other utilities.
Our contingency planning efforts also include developing precautionary measures. Precautionary measures are intended to place us in a position to mitigate the impact of year 2000 related problems, in the unlikely event problems occur. Examples of precautionary measures include planned additional staffing in key operational positions to facilitate quick responses to unusual situations, and having extra supplies on hand to minimize the impact if we experience interrupted access to key supplies.
Virginia Power is actively participating in industry contingency planning efforts at the regional and national level. Virginia Power successfully participated in two nationwide drills by electric utilities on April 9, 1999, and on September 8-9, 1999, coordinated by the North American Electric Reliability Council (NERC). The April exercise simulated the partial failure of some primary voice and data communications to demonstrate the ability of electric utilities to communicate operating information using backup systems. The September drill simulated the rollover and tested administration, operating, communications, and contingency response plans for the Year 2000 transition. No actual communication systems or generating units were shut down during either exercise. Service to Virginia Power customers during the two drills was not affected.
During the remainder of 1999, the project team will focus on validating and fine-tuning contingency plans, non-critical remediation, validation of remediated components, and validation of critical supplier readiness.
Dominion Resources cannot estimate or predict the potential adverse consequences, if any, that could result from a third party's failure to effectively address the year 2000 issue, but believes that any impact would be short-term in nature and would not have a material adverse impact on results of operations. Based on Dominion Resources' and industry analyses to date, we do not believe the most reasonably likely worst case scenarios identified above, if they were to occur, would have a material adverse affect on Dominion Resources' businesses or results of operations.
For additional information, see Year 2000 Compliance, Management's Discussion and Analysis of Operations in Dominion Resources' Annual Report on Form 10-K for the year ended December 31, 1998.
RECENTLY ISSUED ACCOUNTING STANDARDS
For information on recently issued accounting standards, see Note (H) to Consolidated Financial Statements.
DOMINION RESOURCES, INC.
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
MARKET RATE SENSITIVE INSTRUMENTS AND RISK MANAGEMENT
Dominion Resources is exposed to market risk because it utilizes financial instruments, derivative financial instruments and derivative commodity instruments. The market risks inherent in these instruments are represented by the potential loss due to adverse changes in commodity prices, equity security prices, interest rates and foreign currency exchange rates as described below. Interest rate risk generally is related to Dominion Resources' and its subsidiaries' outstanding debt as well as their commercial, consumer, and mortgage lending activities. Currency risk exists principally through Dominion Energy's investments in Canada and some debt denominated in European currencies associated with Dominion Energy's investments in South America. Dominion Resources is exposed to equity price risk through various portfolios of equity securities. Commodity price risk is experienced in Dominion Resources' subsidiaries Dominion Energy and Virginia Power. They are exposed to effects of market shifts in the prices they receive and pay for natural gas and electricity.
Dominion Resources uses derivative commodity instruments to hedge electric operations, gas production and procurement operations and as part of its trading activities.
Dominion Resources is also exposed to price risk associated with the nonfinancial assets and liabilities of power production operations, including underlying fuel requirements and natural gas operations.
Dominion Resources uses the sensitivity analysis methodology to disclose the quantitative information for the interest rate, commodity price and foreign exchange risks. Sensitivity analysis provides a presentation of the potential loss of future earnings, fair values, or cash flows from market risk sensitive instruments over a selected time period due to one or more hypothetical changes in interest rates, foreign currency exchange rates, commodity prices, or other similar price changes. The Tabular Presentation methodology is used to disclose equity price market risk. The tabular presentation of summarized information requires disclosure of key terms and information for market risk sensitive instruments.
Interest Rate Risk - Non-Trading Activities
Dominion Resources and its subsidiaries manage interest rate risk exposure by maintaining a mix of fixed and variable rate debt. In addition, Dominion Resources enters into interest rate sensitive derivatives. Examples of these derivatives are swaps, forwards and futures contracts.
Dominion Resources, as part of its routine risk management policy, reviews its exposure to market risk.
Gas Commodity Price Risk - Non-Trading Activities
Dominion Energy is exposed to the impact of market fluctuations in the sales price Dominion Energy receives for its produced natural gas and oil. To reduce price risk caused by market fluctuations, Dominion Energy generally follows a policy of hedging a portion of its natural gas and oil sales commitments by selecting derivative commodity instruments whose historical price fluctuations correlate strongly with those of the production being hedged. Dominion Energy enters into options, swaps, and collars to mitigate a loss in revenues, should natural gas or oil prices decline in future production periods. Dominion Energy also mitigates price risk by entering into fixed price sale agreements with physical purchasers of natural gas.
When conducting sensitivity analysis of the change in the fair value of Dominion Energy's oil and natural gas contracts which would result from a hypothetical change in the future market price of oil and natural gas, the fair value of the contracts are determined from option pricing models which take into account the market prices of oil and natural gas in future periods, the volatility of the market prices in each period, as well as the time value factors of the underlying commitments. In most instances, market prices and volatility are determined from quoted prices on the futures exchange.
DOMINION RESOURCES, INC.
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
(CONTINUED)
Dominion Resources has determined a hypothetical decrease in fair value for its oil and natural gas contracts assuming a 10% unfavorable change in market prices and comparing it to the fair value of the contracts based on market prices at September 30, 1999 and December 31, 1998. This hypothetical 10% change in market prices would have resulted in a decrease in fair value of approximately $23.4 million and $8 million as of September 30, 1999 and December 31, 1998, respectively.
The impact of a change in oil and natural gas commodity prices on Dominion Energy's oil and natural gas contracts at a point in time is not necessarily representative of the results that will be realized when such contracts are ultimately settled.
Electric and Gas Commodity Price Risk - Trading Activities
As part of its strategy to market energy from its generation capacity and to manage related risks, Virginia Power manages a portfolio of derivative commodity contracts held for trading purposes. These contracts are sensitive to changes in the prices of natural gas and electricity. Virginia Power employs established policies and procedures to manage the risks associated with these price fluctuations and uses various commodity instruments, such as futures, swaps and options, to reduce risk by creating offsetting market positions. In addition, Virginia Power seeks to use its generation capacity, when not needed to serve customers in its service territory, to satisfy commitments to sell energy.
Based on the sensitivity analysis methodology discussed previously in this section, Virginia Power has determined a hypothetical loss by calculating a hypothetical fair value for each contract assuming a 10 percent unfavorable change in the market prices of the related commodity and comparing it to the fair value of the contracts based on market prices at September 30, 1999 and December 31, 1998. This hypothetical 10 percent change in commodity prices would have resulted in a hypothetical loss of approximately $4.5 million and $13.5 million in the fair value of its commodity contracts as of September 30, 1999 and December 31, 1998, respectively.
The sensitivity analysis does not include the price risks associated with utility fuel requirements, since these costs are generally provided for through our rates established by the regulatory commissions having jurisdiction over fuel cost recovery, nor does it include risks that are either nonfinancial or nonquantifiable. In addition, provisions are made in the financial statements to address credit risk.
The risk associated with Dominion Resources' use of these instruments has not materially changed from that discussed in Market Rate Sensitive Instruments and Risk Management under MANAGEMENT'S DISCUSSION AND ANALYSIS OF CASH FLOWS AND FINANCIAL CONDITION included in Dominion Resources' Annual Report on Form 10-K for the year ended December 31, 1998.
DOMINION RESOURCES, INC.
PART II. - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
VIRGINIA POWER
Environmental Matters
In April 1999, Virginia Power was notified by the Department of Justice of alleged noncompliance with the EPA's oil spill, prevention, control and countermeasures (SPCC) plans and facility response plan (FRP) requirements at one of Virginia Power's power stations. If, in a legal proceeding, such instances of noncompliance are deemed to have occurred, Virginia Power may be required to remedy any alleged deficiencies and pay civil penalties. Settlement of this matter is currently in negotiation and is not expected to be material to Virginia Power's financial condition or results of operations.
In August 1999, Virginia Power identified matters at certain other power stations that the EPA might view as not in compliance with the SPCC and FRP requirements. Virginia Power reported these matters to the EPA and its plan for correction thereof. Presently, the EPA has not assessed any penalties against Virginia Power, pending its review of Virginia Power's disclosure information. Future resolution of these matters is not expected to have a material impact on Virginia Power's financial condition or results of operations.
Clean Air Act Matters
On November 8, 1999 and September 21, 1999, Virginia Power received notices from the Attorney General of the States of Connecticut and New York, respectively, of their intention to file suit against Virginia Power for alleged violations of the Clean Air Act. The notices question whether modifications at Virginia Power generating facilities were properly permitted under the Clean Air Act and allege that emissions from these facilities have contributed to damage to public health and the environment in the Northeast. To date, no suits have been filed. Virginia Power believes, based on newspaper reports and other sources, that it is one of a number of companies with fossil fuel power generating stations in the southeast and central U.S. to have received such notifications. Virginia Power believes that it has obtained the permits necessary in connection with its generating facilities and that suits, if any, filed by the Attorney Generals will not have a material adverse effect on Virginia Power and its subsidiaries.
ITEM 5. OTHER INFORMATION
THE COMPANY
2000 Annual Meeting Date
The date on which Dominion Resources plans to hold its 2000 annual shareholders meeting has been changed to April 28, 2000.
The Merger
With respect to Dominion Resources' merger as previously reported, all state regulatory commissions and the FTC have approved the merger, subject to certain conditions agreed to by Dominion Resources and CNG. In addition, FERC has voted to conditionally approve the merger. The companies intend to file a response with FERC accepting the conditions. The companies' request for approval of the transaction is still pending with the Securities and Exchange Commission.
For additional information, see Note (B) to Consolidated Financial Statements.
DOMINION RESOURCES, INC.
PART II. - OTHER INFORMATION
(CONTINUED)
VIRGINIA POWER
Regulation
Virginia
As previously reported, on March 20, 1998, the Virginia Commission issued an Order instructing Virginia Power and AEP-Virginia, as the Commonwealth's two largest investor-owned utilities, each to design and file a retail access pilot program. Virginia Power filed a report on November 2, 1998, describing the details, objectives and characteristics of its proposed retail access pilot program. On August 6, 1999, the Hearing Examiner issued a report on interim rules for the introduction of electric and natural gas retail competition in Virginia. On September 8, 1999, Virginia Power, the Virginia Commission Staff and two other parties entered into an agreement which resolved the size and scope of the proposed Pilot Program and the methodology for determining the market price of electricity used in calculating the wires charge assessed to those customers opting for alternate suppliers. A Hearing was held on September 8-9, 1999 and the Hearing Examiner's Report is anticipated later this year.
FERC
On June 3, 1999, Virginia Power, together with American Electric Power Services Corporation, Consumers Energy Company, The Detroit Edison Company, and First Energy Corporation, on behalf of themselves and their public utility operating company subsidiaries, filed with FERC applications under Sections 205 and 203 of the Federal Power Act for approval of the proposed Alliance Regional Transmission Organization (Alliance RTO).
The application seeks approval to create the Alliance RTO. If accepted, the Alliance RTO would operate the transmission systems of the companies, ensure transmission reliability and provide non-discriminatory access to the transmission grid. The applications include a proposed Alliance RTO open access transmission tariff that would cover service into, from and through the Alliance RTO.
On October 1, 1999, the application process to form the Alliance RTO was completed. The Alliance Companies requested FERC issue an order approving the formation of the Alliance RTO by December 31, 1999.
Rates
Virginia
On October 22, 1999, Virginia Power filed an application with the Virginia Commission for an increase of approximately $86 million in fuel rates to be effective December 1, 1999. Virginia Power is waiting for a hearing to be scheduled.
North Carolina
Rate Agreement
In support of Dominion Resources' request for approval by the North Carolina Utilities Commission (North Carolina Commission) of its proposed merger with Consolidated Natural Gas Company, Virginia Power and Dominion Resources reached an agreement with the Public Staff of the North Carolina Commission. As part of the agreement, Virginia Power agreed not to request an increase in its North Carolina retail electric base rates until after December 31, 2005, except for certain events that would have a significant financial impact on Virginia Power. Such events could include any governmental action or an occurrence that is beyond its control and not attributable to Virginia Power's fault or negligence. However, fuel rates are still subject to change under the annual fuel cost adjustment proceedings. The North Carolina Commission approved the merger, subject to conditions agreed to by Dominion Resources and Virginia Power, on October 18, 1999.
DOMINION RESOURCES, INC.
PART II. - OTHER INFORMATION
(CONTINUED)
Cogenerators and Small Power Producers
As previously reported, on November 6, 1998, Virginia Power filed for approval of a new Schedule 19 which governs purchases from cogenerators and small power producers. On July 16, 1999, the North Carolina Commission issued an order directing Virginia Power to file, on or before July 26, 1999, a long-term standard contract terms and conditions for five, ten and fifteen year periods for qualifying hydro-electric facilities and small power producers. On August 26, 1999 Virginia Power filed the standard contract terms as directed by the North Carolina Commission.
Fuel Filing
On September 17, 1999, Virginia Power filed a request with the North Carolina Commission for a $5.5 million increase in annual fuel rates. A hearing on the matter is scheduled for November 16, 1999.
Sources of Power
On July 6, 1999, Virginia Power established a new one-hour integrated service area summer peak demand of 16,216 Mw and also established a new 24-hour period system energy output record of 326,188 Mwh.
Future Sources of Power
As previously reported, on May 14, 1999, the Virginia Commission approved Virginia Power's construction of four gas-fired turbine generators in Fauquier County, Virginia. A Petition to Appeal the approval was filed by an opposing party on July 13, 1999 in the Virginia Supreme Court. On September 28, 1999, the Virginia Supreme Court agreed to hear the Appeal. The same party has appealed the air permit issued to Virginia Power by the Department of Environmental Quality. Virginia Power will participate in both of the appeals in support of upholding the applicable order and permit. Construction of the units has begun with commercial operation expected by mid 2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3 - |
Bylaws as in effect October 15, 1999 (filed herewith). |
11- |
Statement re: computation of per share earnings (included in this Form 10-Q on page 3) |
27- |
Financial Data Schedule (filed herewith). |
(b) Reports 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. |
|
BY JAMES L. TRUEHEART |
|
James L. Trueheart |
|
|
November 12, 1999
Exhibit 3
Dominion Resources, Inc.
Bylaws
As Amended, effective October 15, 1999
Table of Contents
Article Page
|
I. |
Name |
1 |
|
II. |
Shareholders' Meetings |
1 |
|
III. |
Annual Meeting |
1 |
|
IV. |
Special Meetings |
1 |
|
V. |
Notice of Shareholders' Meetings and Voting Lists |
2 |
|
VI. |
Waiver of Notice |
3 |
|
VII. |
Quorum |
3 |
|
VIII. |
Proxy and Voting |
4 |
|
IX. |
Board of Directors |
4 |
|
X. |
Powers of Directors |
5 |
|
XI. |
Executive and Other Committees |
6 |
|
XII. |
Meetings of Directors and Quorum |
7 |
|
XIII. |
Action Without a Meeting |
8 |
|
XIV. |
Officers |
8 |
|
XV. |
Eligibility of Officers |
8 |
|
XVI. |
Duties and Authority of Chairman of the Board of Directors, Vice Chairman, President and Others |
9 |
|
XVII. |
Vice Presidents |
9 |
|
XVIII. |
Corporate Secretary |
10 |
|
XIX. |
Treasurer |
10 |
|
XX. |
Controller |
11 |
|
XXI. |
Resignations and Removals |
11 |
|
XXII. |
Vacancies |
12 |
|
XXIII. |
Certificates for Shares |
12 |
|
XXIV. |
Transfer of Shares |
13 |
|
XXV. |
Record Date |
13 |
|
XXVI. |
Voting of Shares Held |
14 |
|
XXVII. |
Bonds, Debentures and Notes Issued Under an Indenture |
14 |
|
XXVIII. |
Amendments |
14 |
|
XXIX. |
Emergency Bylaws |
15 |
|
XXX. |
Shareholder Proposals |
17 |
|
XXXI. |
Control Share Acquisitions |
18 |
Article I. Name.
The name of the Corporation is Dominion Resources, Inc.
Article II. Shareholders' Meetings.
All meetings of the Shareholders shall be held at such place, within or without of the Commonwealth, as provided in the notice of the meeting given pursuant to Article V. If the Chairman of the meeting determines that the holding of any meeting at the place named in the notice might be hazardous, he may cause it to be held at some other place deemed by him suitable and convenient, upon arranging notice to Shareholders who attend at the first place and reasonable opportunity for them to proceed to the new place.
Article III. Annual Meeting.
The Annual Meeting of the Shareholders shall be held on the fourth Friday in April in each year if not a legal holiday, and if a legal holiday then on the next business day not a legal holiday. In the event that such Annual Meeting is omitted by oversight or otherwise on the date herein provided for, the Board of Directors shall cause a meeting in lieu thereof to be held as soon thereafter as conveniently may be, and any business transacted or elections held at such meeting shall be as valid as if transacted or held at the Annual Meeting. Such subsequent meeting shall be called in the same manner as provided for Special Shareholders' Meetings.
Article IV. Special Meetings.
Special Meetings of the Shareholders shall be held whenever called by the Chairman of the Board of Directors, the Vice Chairman, the President, or a majority of the Directors. Special Meetings of the Shareholders may also be held following the accrual or termination of voting rights of the Preferred Stock, whenever requested to be called in the manner provided in the Articles of Incorporation.
Article V. Notice of Shareholders' Meetings and Voting Lists.
Notice stating the place, day and hour of each Shareholders' Meeting and the purpose or purposes for which the meeting is called shall be given not less than 10 nor more than 60 days before the date of the meeting, or such longer period as is specified below, by, or at the direction of, the Board of Directors or its Chairman, the Vice Chairman, the President or any Vice President or the Corporate Secretary or any Assistant Corporate Secretary, to each Shareholder of record entitled to vote at the meeting. Notice may be given by mail to a Shareholder at his or her registered address and such notice will be deemed to be given when deposited in the United States mails addressed to the Shareholder at his address as it appears on the stock transfer books, with postage thereon prepaid. Alternatively, notice may be given to a Shareholder by electronic transmission as permitted by the Virginia Stock Corporation Act or any other applicable law.
Notice of a Shareholders' Meeting to act on an amendment of the Articles of Incorporation, on a plan of merger or share exchange, on a proposed dissolution of the Corporation, or on a proposed sale, lease or exchange, or other disposition, of all, or substantially all, of the property of the Corporation otherwise than in the usual and regular course of business, shall be given not less than 25 nor more than 60 days before the date of the meeting. Any notice of a Shareholders' Meeting to act on an amendment of the Articles of Incorporation or a plan of merger or share exchange or a proposed sale, lease or exchange, or other disposition of all, or substantially all, of the property of the Corporation otherwise than in the usual and regular course of business shall be accompanied by a copy of the proposed amendment or plan of merger or exchange or agreement effecting the disposition of assets.
Any meeting at which all Shareholders having voting power in respect of the business to be transacted thereat are present, either in person or by proxy, or of which those not present waive notice in writing, whether before or after the meeting, shall be a legal meeting for the transaction of business notwithstanding that notice has not been given as herein before provided.
The officer or agent having charge of the share transfer books of the Corporation shall make, at least 10 days before each meeting of Shareholders, a complete list of the Shareholders entitled to vote at such meeting or any adjournment thereof, with the address of and number of shares held by each. The list shall be arranged by voting group and within each voting group by class or series of shares. Such list, for a period of 10 days prior to such meeting, shall be kept on file at the principal place of business of the Corporation. Any person who shall have been a Shareholder of record for at least 6 months immediately preceding his demand or who shall be the holder of record of at least 5% of all the outstanding shares of the Corporation, upon demand stating with reasonable particularity the purpose thereof, shall have the right to inspect such list, in person, for any proper purpose if such list is directly connected with such purpose, during usual business hours within the period of 10 days prior to the meeting. Such list shall also be produced at the time and place of the meeting and shall be subject to the inspection of any Shareholder during the whole time of the meeting for the purposes thereof.
Article VI. Waiver of Notice.
Notice of any Shareholders' Meeting may be waived by any Shareholder, whether before or after the date of the meeting. Such waiver of notice shall be in writing, signed by the Shareholder and delivered to the Corporate Secretary. Any Shareholder who attends a meeting shall be deemed to have waived objection to lack of notice or defective notice of the meeting, unless the Shareholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting and shall be deemed to have waived objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the Shareholder objects to considering the matter when it is presented.
Article VII. Quorum.
At any meeting of the Shareholders, a majority in number of votes of all the shares issued and outstanding having voting power in respect of the business to be transacted thereat, represented by such Shareholders of record in person or by proxy, shall constitute a quorum, but a lesser interest may adjourn any meeting from time to time and the meeting may be held as adjourned without further notice. When a quorum is present at any meeting, a majority vote represented thereat shall decide any question brought before such meeting, unless the question is one upon which by express provision of law or of the Articles of Incorporation or of these Bylaws a larger or different vote is required, in which case such express provision shall govern and control the decision of such question. The provisions of this Article are, however, subject to the provisions of the Articles of Incorporation.
Article VIII. Proxy and Voting.
Shareholders of record entitled to vote may vote at any meeting held, in person or by proxy executed in writing or by proxy authorized by any means permitted by the Virginia Stock Corporation Act or other applicable law, in each case by the Shareholder or by his or her duly authorized officer, director, employee or agent, which proxy shall be filed with or received by the Corporate Secretary of the meeting before being voted. A proxy shall designate only one person as proxy, except that proxies executed pursuant to a general solicitation of proxies may designate one or more persons as proxies. Proxies shall entitle the holders thereof to vote at any adjournment of the meeting, but shall not be valid after the final adjournment thereof. No proxy shall be valid after 11 months from its date unless the appointment form expressly provides for a longer period of validity. Shareholders entitled to vote may also be represented by an agent personally present, duly designated by power of attorney, with or without power of substitution, and such power of attorney shall be produced at the meeting on request. Each holder of record of shares of any class shall, as to all matters in respect of which shares of any class have voting power, be entitled to one vote for each share of stock of such class standing in his name on the books.
Article IX. Board of Directors.
A Board of Directors shall be chosen by ballot at the Annual Meeting of the Shareholders or at any meeting held in lieu thereof as herein before provided.
Subject to the rights of holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, nominations for the election of Directors shall be made by the Board of Directors or a committee appointed
by the Board of Directors or by any Shareholder entitled to vote in the election of Directors generally. However, any Shareholder entitled to vote in the election of Directors generally may nominate one or more persons for election as Directors at a
meeting only if written notice of such Shareholder's intent to make such nomination or nominations has been given, either by personal delivery or by United States mail, postage prepaid, to the Corporate Secretary of the Corporation not later than 60 days
in advance of such meeting (except that, if public disclosure of the meeting is made less than 70 days prior
to the meeting, the notice need only be received within 10 days following such public disclosure). Each such notice shall set forth: (a) the name and address of the Shareholder who intends to make the nomination and of the person or persons to be
nominated; (b) a representation that the Shareholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice;
(c) a description of all arrangements or understandings between the Shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the Shareholder; (d) such
other information regarding each nominee proposed by such Shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, had the nominee been nominated, or intended to be
nominated, by the Board of Directors; and (e) the consent of each nominee to serve as a Director of the Corporation if so elected. The Chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing
procedure.
Article X. Powers of Directors.
All corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be managed under the direction of, the Board of Directors, subject to any limitation set forth in the Articles of Incorporation and so far as this delegation of authority is not inconsistent with the laws of the Commonwealth of Virginia, with the Articles of Incorporation or with these Bylaws.
Article XI. Executive and Other Committees.
The Board of Directors, by resolution passed by a majority of the whole Board, may designate two or more of its number to constitute an Executive Committee. If a quorum is present, the Committee may act upon the affirmative vote of a majority of the Committee members present.
When the Board of Directors is not in session, the Executive Committee shall have and may exercise all of the authority of the Board of Directors except that the Executive Committee shall not (a) approve or recommend to Shareholders action that Virginia law requires to be approved by Shareholders; (b) fill vacancies on the Board of Directors or any of its Committees or elect officers; (c) Amend Articles of Incorporation other than as permitted by statute; (d) adopt, amend or repeal these Bylaws; (e) approve a plan of merger not requiring Shareholder approval; (f) authorize or approve a distribution, except according to a general formula or method prescribed by the Board of Directors; or (g) authorize or approve the issuance or sale or contract for sale of shares, or determine the designation and relative rights, preferences, and limitations of a class or series of shares, except that the Board of Directors may authorize the Executive Committee to do so within limits specifically prescribed by the Board of Directors. If the Executive Committee is created for any designated purpose, its authority shall be limited to such purpose. The Executive Committee shall report its action to the Board of Directors. Regular and special meetings of the Executive Committee may be called and held subject to the same requirements with respect to time, place and notice as are specified in these Bylaws for regular and special meetings of the Board of Directors.
Members of the Executive Committee shall receive such compensation for attendance at meetings as may be fixed by the Board of Directors.
The Board of Directors likewise may appoint from their number, from the directors of affiliated corporations or from officers of the Corporation other Committees from time to time, the number composing such Committees and the power conferred upon the same to be subject to the foregoing exceptions for an Executive Committee but otherwise as determined by vote of the Board of Directors provided that any Committee empowered to exercise the authority of the Board of Directors shall be composed only of members of the Board of Directors. The Board of Directors may designate one or more Directors to represent the Corporation at meetings of committees of affiliated corporations. Members of such committees, and Directors so designated, shall receive such compensation for attendance at meetings as may be fixed by the Board of Directors.
Article XII. Meetings of Directors and Quorum.
Regular Meetings of the Board of Directors may be held at such places within or without the Commonwealth of Virginia and at such times as the Board by vote may determine from time to time, and if so determined no notice thereof need be given. Special Meetings of the Board of Directors may be held at any time or place either within or without the Commonwealth of Virginia, whenever called by the Chairman of the Board of Directors, the Vice Chairman, the President, any Vice President, the Corporate Secretary, or three or more Directors, notice thereof being given to each Director by the Corporate Secretary or an Assistant Corporate Secretary, the Directors or the officer calling the meeting, or at any time without formal notice provided all the Directors are present or those not present waive notice thereof. Notice of Special Meetings, stating the time and place thereof, shall be given by mailing the same to each Director at his residence or business address at least two days before the meeting, or by delivering the same to him personally or telephoning or telegraphing the same to him at his residence or business address at least one day before the meeting, unless, in case of exigency, the Chairman of the Board of Directors, the Vice Chairman or the President shall prescribe a shorter notice to be given personally or by telephoning or telegraphing each Director at his residence or business address.
A written waiver of notice signed by the Director entitled to such notice, whether before or after the date of the meeting, shall be equivalent to the giving of such notice. A Director who attends or participates in a meeting shall be deemed to have
waived timely and proper notice of the meeting unless the Director, at the beginning of the meeting or promptly upon
his arrival, objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting.
A majority of the number of Directors fixed at the time in accordance with the Bylaws shall constitute a quorum for the transaction of business, but a lesser number may adjourn any meeting from time to time, and the meeting may be held without further notice. The foregoing provision is, however, subject to the Articles of Incorporation. When a quorum is present at any meeting, a majority of the members present thereat shall decide any question brought before such meeting, except as otherwise provided by law, by the Articles of Incorporation, or by these Bylaws.
Article XIII. Action Without a Meeting.
Any action required to be taken at a meeting of the Directors, or any action which may be taken at a meeting of the Directors or of a Committee, may be taken without a meeting if a consent in writing (which may be in any number of counterparts), setting forth the action so to be taken, shall be signed by all of the Directors, or all of the members of the Committee, as the case may be, either before or after such action is taken. Such consent shall have the same force and effect as a unanimous vote.
Article XIV. Officers.
The officers of the Corporation shall be a President, one or more Vice Presidents, a Corporate Secretary, a Treasurer and a Controller. The Chairman of the Board of Directors and the Vice Chairman shall also be officers unless they are not also full-time employees of the Corporation. The officers and the Chairman of the Board of Directors and the Vice Chairman shall be elected or appointed by the Board of Directors after each election of Directors by the Shareholders, and a meeting of the Board of Directors may be held without notice for the purpose of electing officers following the Annual Meeting of the Shareholders.
The Board of Directors, in its discretion, may appoint one or more Assistant Corporate Secretaries, one or more Assistant Treasurers, one or more Assistant Controllers, and such other officers or agents as it may deem
advisable, and prescribe their duties.
Article XV. Eligibility of Officers.
The Chairman of the Board of Directors, the Vice Chairman and the President shall be Directors. Any person may hold more than one office provided, however, that neither the Corporate Secretary, the Treasurer nor the Controller shall at the same time hold the office of Chairman of the Board of Directors, Vice Chairman or President.
Article XVI. Duties and Authority of Chairman of the Board of Directors, Vice Chairman, President and Others.
The Chairman of the Board of Directors or the Vice Chairman shall preside at the meetings of the Board of Directors. He may call meetings of the Board of Directors and of any Committee thereof whenever he deems it necessary. He shall call to order, and act as chairman of, all meetings of the Shareholders and prescribe rules of procedure therefor. The Chairman and the Vice Chairman shall perform the duties commonly incident to such office and such other duties as the Board of Directors shall designate from time to time.
The Board of Directors may designate the Chief Executive Officer of the Corporation.
In the absence of the Chairman of the Board of Directors or the Vice Chairman, the President shall perform their duties. The President shall perform the duties commonly incident to his office and such other duties as the Board of Directors shall designate from time to time. The Chief Executive Officer, the President and each Vice President shall have authority to sign certificates for shares of stock, bonds, deeds and contracts and to delegate such authority in such manner as may be approved by the Chief Executive Officer or the President.
If the Chairman, Vice Chairman and President are unable to serve as Chairman of any Shareholders' Meeting, then the Corporate Secretary, may serve in their place.
Article XVII. Vice Presidents.
Each Vice President shall perform such duties and have such other powers as the Board of Directors shall designate from time to time. In the event of the absence or disability of the President, the duties and powers of the President shall be performed and exercised by the Vice President designated to so act by the line of succession provided by the Board of Directors, or if not so provided by the Board of Directors, in accordance with the following order of priority:
(a) The Executive Vice Presidents in order of their seniority of first election to such office, or if two or more shall have been first elected to such office on the same day, in order of their seniority in age;
(b) The Senior Vice Presidents in order of their seniority of first election to such office, or if two or more shall have been first elected to such office on the same day, in order of their seniority in age;
(c) All other Vice Presidents at the principal office of the Corporation in the order of their seniority of first election to such office or if two or more shall have been first elected to such office on the same day, the order of their seniority in age; and
(d) Any other persons that are designated on a list that shall have been approved by the Board of Directors, such persons to be taken in such order of priority and subject to such conditions as may be provided in the resolution approving the list.
Article XVIII. Corporate Secretary.
The Corporate Secretary shall keep accurate minutes of all meetings of the Shareholders, the Board of Directors and the Executive Committee, respectively, shall perform the duties commonly incident to his office, and shall perform such other duties and have such other powers as the Board of Directors shall designate from time to time. The Corporate Secretary shall have power together with the Chief Executive Officer, the President or a Vice President, to sign certificates for shares of stock. In his absence an Assistant Corporate Secretary shall perform his duties.
Article XIX. Treasurer.
The Treasurer, subject to the order of the Board of Directors, shall have the care and custody of the money, funds and securities of the Corporation and shall have and exercise under the supervision of the Board of Directors, all the powers
and duties commonly incident to his office. He shall deposit all funds of the Corporation in such bank or banks, trust company or trust companies or with such firm or firms doing a banking business, as the Directors shall designate. He may endorse for
deposit or collection all checks, notes, et cetera, payable to the Corporation or to its order, may
accept drafts on behalf of the Corporation, and, together with the Chief Executive Officer, the President or a Vice President, may sign certificates for shares of stock.
All checks, drafts, notes and other obligations for the payment of money except bonds, debentures and notes issued under an indenture shall be signed either manually or, if and to the extent authorized by the Board of Directors, through facsimile, by the Treasurer or an Assistant Treasurer or such other officer or agent as the Board of Directors shall authorize. Checks for the total amount of any payroll may be drawn in accordance with the foregoing provisions and deposited in a special fund.
Checks upon this fund may be drawn by such person as the Treasurer shall designate.
Article XX. Controller.
The Controller shall keep accurate books of account of the Corporation's transactions and shall perform such other duties and have such other powers as the Board of Directors shall designate from time to time.
Article XXI. Resignation and Removals.
Any Director or officer may resign at any time by giving written notice to the Board of Directors, to the Chairman of the Board of Directors, to the Vice Chairman, to the President or to the Corporate Secretary, and any member of any Committee may resign by giving written notice either as aforesaid or to the Committee of which he is a member or the chairman thereof. Any officer may resign at any time by delivering notice to the Corporation. Any such resignation shall take effect at the time specified therein or, if the time be not specified, upon receipt thereof; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
The Shareholders, at any meeting called for the purpose, by vote of a majority of the stock having voting power issued and outstanding, may remove any Director from office with cause and elect his successor. The Board of Directors, by vote of a majority of the entire Board, may remove any officer, agent or member of any Committees with or without cause from office.
Article XXII. Vacancies.
If the office of any officer or agent, one or more, becomes vacant by reason of death, disability, resignation, removal, disqualification or otherwise, the Directors at the time in office, if a quorum, may, by a majority vote at a meeting at which a quorum is present, choose a successor or successors who shall hold office for the unexpired term or until his successor is duly elected and qualified or his position is eliminated.
Article XXIII. Certificates for Shares.
Every Shareholder shall be entitled to a certificate or certificates for shares of record owned by him in such form as may be prescribed by the Board of Directors, duly numbered and setting forth the number and kind of shares to which such Shareholder is entitled. Such certificates shall be signed by the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Corporate Secretary or an Assistant Corporate Secretary. The Board of Directors may also appoint one or more Transfer Agents and/or Registrars for its stock of any class or classes and may require stock certificates to be countersigned and/or registered by one or more of such Transfer Agents and/or Registrars. If certificates for shares are signed, either manually or by facsimile, engraved or printed, by a Transfer Agent or by a Registrar, the signatures thereon of the President or a Vice President and the Treasurer or an Assistant Treasurer or the Corporate Secretary or an Assistant Corporate Secretary may be facsimiles, engraved or printed. Any provisions of these Bylaws with reference to the signing of stock certificates shall include, in cases above permitted, such facsimiles.
In case any officer or officers who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or certificates shall cease to be such officer or officers of the Corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures shall have been used thereon had not ceased to be such officer or officers of the Corporation. Notwithstanding the foregoing, the Board of Directors may authorize the issue of some or all of the shares of any or all of its classes or series without certificates. Within a reasonable time after the issue or transfer of shares without certificates, the Corporation shall send the Shareholder a written statement of the information required on certificates by the Virginia Stock Corporation Act or other applicable law.
Article XXIV. Transfer of Shares.
Shares may be transferred by delivery of the certificate accompanied either by an assignment in writing on the back of the certificate or by a written power of attorney to sell, assign and transfer the same on the books of the Corporation, signed by the person appearing by the certificate to be the owner of the shares represented thereby, and shall be transferable on the books of the Corporation upon surrender thereof so assigned or endorsed. The person registered on the books of the Corporation as the owner of any shares shall be entitled exclusively as the owner of such shares, to receive dividends and to vote in respect thereof. It shall be the duty of every Shareholder to notify the Corporation of his address.
Article XXV. Record Date.
For the purpose of determining the Shareholders entitled to notice of or to vote at any meeting of Shareholders, or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of Shareholders for any other proper purpose, the Board of Directors may fix in advance a date as the record date for any such determination of Shareholders, provided that such date shall not in any case be more than 70 days prior to the date on which the particular action, requiring such determination of Shareholders, is to be taken. The Board of Directors is authorized to delegate the determination of a record date to the Corporate Secretary for any meeting of Shareholders. If no record date shall be fixed for the determination of Shareholders entitled to notice of or to vote at a meeting of Shareholders, or for the determination of the Shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of Shareholders in such cases. A determination of Shareholders entitled to notice of or to vote at a Shareholders' meeting is effective for any adjournment of the meeting unless the Board of Directors or Corporate Secretary, as the case may be, fixes a new record date, which shall be done if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting.
Article XXVI. Voting of Shares Held.
Unless the Board of Directors shall otherwise provide, the Chairman of the Board of Directors, the Vice Chairman, the Chief Executive Officer, the President, any Vice President, or the Corporate Secretary may from time to time appoint one or more attorneys-in-fact or agents of the Corporation, in the name and on behalf of the Corporation, to cast the votes that the Corporation may be entitled to cast as a shareholder or otherwise in any other corporation, any of whose stock or securities of which may be held by the Corporation, at meetings of the holders of any such other corporations, or to consent in writing to any action by any such other corporation, and may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent, and may execute or cause to be executed on behalf of the Corporation such written proxies, consents, waivers or other instruments as he may deem necessary or proper in the premises; or either the Chairman of the Board of Directors, the Vice Chairman, the Chief Executive Officer, the President or the Corporate Secretary may himself attend any meeting of the shareholders of any such other corporation and thereat vote or exercise any or all other powers of the Corporation as the shareholder of such other corporation.
Article XXVII. Bonds, Debentures and Notes Issued Under an Indenture.
All bonds, debentures and notes issued under an indenture shall be signed by the Chief Executive Officer, the President or any Vice President or such other officer or agent as the Board of Directors shall authorize and by the Corporate Secretary or any Assistant Corporate Secretary or by the Treasurer or any Assistant Treasurer or such other officer or agent as the Board of Directors shall authorize. The signature of any authorized officer of the Corporation on bonds, debentures and notes authenticated by a corporate trustee may be made manually or by facsimile.
Article XXVIII. Amendments.
Both the Board of Directors and the Shareholders shall have the power to alter, amend or repeal the Bylaws of the Corporation or to adopt new Bylaws, but Bylaws enacted by the Shareholders, if expressly so provided, may not be altered, amended or repealed by the Directors.
Notwithstanding the foregoing, Articles IV and IX of these Bylaws may not be amended, altered, changed or repealed without the affirmative vote of at least two-thirds of the outstanding shares of the Corporation entitled to vote.
Article XXIX. Emergency Bylaws.
The Emergency Bylaws provided in this Article XXIX shall be operative during any emergency notwithstanding any different provision in the preceding Articles of the Bylaws or in the Articles of Incorporation of the Corporation or in the Virginia Stock Corporation Act. An emergency exists if a quorum of the Corporation's Board of Directors cannot readily be assembled because of some catastrophic event. To the extent not inconsistent with these Emergency Bylaws, the Bylaws provided in the preceding Articles shall remain in effect during such emergency and upon the termination of such emergency the Emergency Bylaws shall cease to be operative unless and until another such emergency shall occur.
During any such emergency:
(a) Any meeting of the Board of Directors may be called by any officer of the Corporation or by any Director. Notice shall be given by the person calling the meeting. The notice shall specify the time and place of the meeting. Notice may be given only to such of the Directors as it may be feasible to reach at the time and by such means as may be feasible at the time, including publication or radio. If given by mail, messenger or telephone, the notice shall be addressed to the Director's address or such other place as the person giving the notice shall deem most suitable. Notice shall be similarly given, to the extent feasible, to the other persons referred to in (b) below. Notice shall be given at least two days before the meeting if feasible in the judgment of the person giving the notice, but otherwise shall be given any time before the meeting as the person giving the notice shall deem necessary.
(b) At any meeting of the Board of Directors, a quorum shall consist of a majority of the number of Directors fixed at the time by Article IX of the Bylaws. If the Directors present at any particular meeting shall be fewer than the number required for such quorum, other persons present, as determined by the following provisions and in the following order of priority, up to the number necessary to make up such quorum, shall be deemed Directors for such particular meeting:
(i) The Executive Vice Presidents in the order of their seniority of first election to such office, or if two or more shall have been first elected to such office on the same day, in the order of their seniority in age;
(ii) The Senior Vice Presidents in the order of their seniority of first election to such office, or if two or more shall have been first elected to such office on the same day, in the order of their seniority in age;
(iii) All other Vice Presidents at the principal office of the Corporation in the order of their seniority of first election to such office, or if two or more shall have been first elected to such office on the same day, in the order of their seniority in age; and
(iv) Any other persons that are designated on a list that shall have been approved by the Board of Directors before the emergency, such persons to be taken in such order of priority and subject to such conditions as may be provided in the resolution approving the list.
(c) The Board of Directors, during as well as before any such emergency, may provide, and from time to time modify, lines of succession in the event that during such an emergency any or all officers or agents of the Corporation for any reason shall be rendered incapable of discharging their duties.
(d) The Board of Directors, before and during any such emergency, may, effective in the emergency, change the principal office or designate several alternative principal offices or regional offices, or authorize the officers so to do.
No officer, Director or employee shall be liable for any action taken in good faith in accordance with these Emergency Bylaws.
These Emergency Bylaws shall be subject to repeal or change by further action of the Board of Directors or by action of the Shareholders, except that no such repeal or change shall modify the provisions of the next preceding paragraph with regard to action or inaction prior to the time of such repeal or change. Any such amendment of these Emergency Bylaws may make any further or different provision that may be practical and necessary for the circumstances of the emergency.
Article XXX. Shareholder Proposals.
To be properly brought before a meeting of Shareholders, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors or (c) otherwise properly brought before the meeting by a Shareholder. In addition to any other applicable requirements, for business to be properly brought before an Annual Meeting by a Shareholder, the Shareholder must have given timely notice thereof in writing to the Corporate Secretary of the Corporation. To be timely, a Shareholder's notice must be given, either by personal delivery or by United States registered or certified mail, postage prepaid, to the Corporate Secretary of the Corporation not later than 90 days prior to the date of the anniversary of the immediately preceding Annual Meeting. A Shareholder's notice to the Corporate Secretary shall set forth as to each matter the Shareholder proposes to bring before the Annual Meeting (a) a brief description of the business desired to be brought before the Annual Meeting, including the complete text of any resolutions to be presented at the Annual Meeting, with respect to such business, and the reasons for conducting such business at the meeting, (b) the name and address of record of the Shareholder proposing such business, (c) the class and number of shares of the Corporation that are beneficially owned by the Shareholder and (d) any material interest of the Shareholder in such business. In the event that a Shareholder attempts to bring business before an Annual Meeting without complying with the foregoing procedure, the Chairman of the meeting may declare to the meeting that the business was not properly brought before the meeting and, if he shall so declare, such business shall not be transacted.
Article XXXI. Control Share Acquisitions.
In the event that any acquiring person (an Acquiring Person) as defined in Section 13.1-728.1 of the Virginia Stock Corporation Act (the Act), either (a) fails to comply with the provisions of Section 13.1-728.4 of the Act or (b) fails to obtain the approval of the Shareholders of the Corporation at any meeting held pursuant to Section 13.1-728.5, then the Corporation shall have authority, upon approval by resolution of the Board of
Directors to call for redemption, at anytime within 60 days after the last acquisition of any such shares by such Acquiring Person or the date of such meeting, as the case may be, and thereafter to redeem on such date within such 60-day period as may be specified in such resolution (the
Redemption Date) all shares of Common Stock of the Corporation theretofore acquired by the Acquiring Person in a control share acquisition (as defined in Section 13.1-728.1 of the Act) and then owned beneficially by such Acquiring Person, as such number of shares may be either (a) shown on any control share acquisition statement or any statement or report filed by the Acquiring Person with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, or (b) otherwise determined by the Board of Directors. The redemption price shall be paid in cash on the Redemption Date against delivery at the principal office of the Corporation of certificates evidencing the shares so redeemed.
All determinations by the Board of Directors as to (a) the status of any person as an Acquiring Person under the Act, (b) the number of shares of the Corporation owned by such Acquiring Person, (c) the timeliness of compliance by any Acquiring Person within Section 13.1-728.4 of the Act, or (d) the interpretation of the Act or this Article if made in good faith, shall be conclusive and binding on all persons.