Southern Company reports fourth-quarter and full-year 2014 earnings

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Feb 04, 2015, 07:30 ET

ATLANTA, Feb. 4, 2015 /PRNewswire/ -- Southern Company today reported fourth-quarter 2014 earnings of $300 million, or 33 cents per share, compared with earnings of $414 million, or 47 cents per share, in the fourth quarter of 2013. Southern Company also reported full-year 2014 earnings of $1.98 billion, or $2.21 per share, compared with earnings for 2013 of $1.64 billion, or $1.88 per share.

Earnings for the fourth quarter of 2014 include after-tax charges of $43 million, or 5 cents per share – and earnings for the full year 2014 include after-tax charges totaling $536 million, or 59 cents per share – related to increased cost estimates for construction of Mississippi Power's Kemper County integrated gasification combined cycle project. Earnings for the fourth quarter of 2013 include after-tax charges of $25 million, or 3 cents per share – and earnings for the full year 2013 include after-tax charges totaling $729 million, or 83 cents per share – related to increased cost estimates for construction of the Kemper project. Earnings for the full year 2013 also include an after-tax charge of $16 million, or 2 cents per share, for the restructuring of a leveraged lease investment recorded in the first quarter of 2013. Earnings for the fourth quarter and full year 2013 also include $12 million, or 2 cents per share, of insurance recovery related to the March 2009 litigation settlement agreement with MC Asset Recovery, LLC. Excluding these items, earnings for the fourth quarter and full year 2014 were 38 cents and $2.80 per share, respectively, compared with 48 cents and $2.71 per share, respectively, for the same periods in 2013.

Earnings for the fourth quarter and full year 2014 were positively influenced by retail revenue effects at Southern Company's traditional operating companies, offset by increased operating and maintenance expenses. Full-year 2014 earnings were further positively influenced by closer-to-normal weather and increased customer growth compared with the full year 2013.

"Southern Company had one of its best years ever serving customers in 2014," said Southern Company Chairman, President and CEO Thomas A. Fanning. "We continued to lead the industry in customer satisfaction and set several all-time records for system reliability. Our commitment to providing clean, safe, reliable and affordable electricity – while making communities better off because we're there – remains the cornerstone of our business."

Fanning said economic growth was especially strong during the second half of 2014, led by manufacturing activity, growth in exports and a stronger domestic economy.

Operating revenues for the full year 2014 were $18.5 billion, compared with $17.1 billion in 2013, an increase of 8.3 percent. Fourth-quarter 2014 operating revenues were $4.0 billion, compared with $3.9 billion for the same period in 2013, an increase of 3.1 percent.

Kilowatt-hour sales to retail customers in the Southern Company system's four-state service area increased 3.3 percent in 2014, compared with 2013. Residential energy sales increased 5.5 percent, commercial energy sales increased 1.3 percent and industrial energy sales increased 3.3 percent.

Total energy sales to the Southern Company system's customers in the Southeast, including wholesale sales, increased 6.0 percent in 2014, compared with 2013.

Southern Company's financial analyst call will begin at 1 p.m. Eastern time today, during which Fanning and Chief Financial Officer Art P. Beattie will discuss earnings and provide a general business update. Investors, media and the public may listen to a live webcast of the call and view associated slides at http://investor.southerncompany.com/webcasts. A replay of the webcast will be available at the site for 12 months.

Southern Company has also posted on its website detailed financial information on its fourth-quarter and full-year performance. These materials are available at www.southerncompany.com.

With more than 4.5 million customers and approximately 46,000 megawatts of generating capacity, Atlanta-based Southern Company (NYSE: SO) is the premier energy company serving the Southeast through its subsidiaries. A leading U.S. producer of clean, safe, reliable and affordable electricity, Southern Company owns electric utilities in four states and a growing competitive generation company, as well as fiber optics and wireless communications. Southern Company brands are known for energy innovation, excellent customer service, high reliability and retail electric prices that are below the national average. Southern Company and its subsidiaries are leading the nation's nuclear renaissance through the construction of the first new nuclear units to be built in a generation of Americans and are demonstrating their commitment to energy innovation through the development of a state-of-the-art coal gasification plant. Southern Company has been recognized by the U.S. Department of Defense and G.I. Jobs magazine as a top military employer, listed by DiversityInc as a top company for Blacks and designated a 2013 Top Employer for Hispanics by Hispanic Network. The company received the Edison Award from the Edison Electric Institute for its leadership in new nuclear development, was named Electric Light & Power magazine's Utility of the Year for 2012 and is continually ranked among the top utilities in Fortune's annual World's Most Admired Electric and Gas Utility rankings. Visit our website at www.southerncompany.com.

Page 3
Southern Company
Financial Highlights
*(In Millions of Dollars Except Earnings Per Share)*

	Three Months Ended December				Year-to-Date December
	2014		2013		2014		2013
Consolidated Earnings–As Reported
(See Notes)
Traditional Operating Companies	$	257	$	387	$	1,814	$	1,486
Southern Power	44		24		172		166
Total	301		411		1,986		1,652
Parent Company and Other	(1)		3		(6)		(8)
Net Income–As Reported	$	300	$	414	$	1,980	$	1,644

Basic Earnings Per Share	$	0.33	$	0.47	$	2.21	$	1.88

Average Shares Outstanding (in millions)	906		885		897		877
End of Period Shares Outstanding (in millions)					909		888

	Three Months Ended December				Year-to-Date December
	2014		2013		2014		2013
Consolidated Earnings–Excluding Items
(See Notes)
Net Income–As Reported	$	300	$	414	$	1,980	$	1,644
Estimated Loss on Kemper IGCC	43		25		536		729
Leveraged Lease Restructure	—		—		—		16
MC Asset Recovery Insurance Settlement, net		—		(12)		—		(12)
Net Income–Excluding Items	$	343	$	427	$	2,516	$	2,377

Basic Earnings Per Share–Excluding Items	$	0.38	$	0.48	$	2.80	$	2.71

Notes

- For the three and twelve months ended December 31, 2014 and 2013, dilution does not change basic earnings per share by more than 1 cent and is not material.

- The estimated probable losses relating to Mississippi Power Company's construction of the integrated coal gasification combined cycle facility in Kemper County, Mississippi (Kemper IGCC) significantly impacted the presentation of earnings and earnings per share for the three and twelve months ended December 31, 2014 and 2013 and any similar charges may occur with uncertain frequency.

- The charge related to the restructuring of a leveraged lease investment that was completed on March 1, 2013 impacted the presentation of earnings and earnings per share for the twelve months ended December 31, 2013 and similar charges are not expected to occur with any regularity in the future.

- Earnings for the three and twelve months ended December 31, 2013 include an insurance settlement related to the March 2009 litigation settlement with MC Asset Recovery, LLC and similar insurance recoveries are not expected to occur with any regularity in the future.

- All figures in this earnings release are preliminary and remain subject to the completion of normal quarter-end accounting procedures and adjustments, which could result in changes to these preliminary results. In addition, certain classifications and rounding may be different from final results published in the Form 10-K.

Page 4

Southern Company

Significant Factors Impacting EPS

Three Months Ended

December

Year-to-Date

December

2014

2013

Change

2014

2013

Change

Consolidated Earnings Per Share–

As Reported (See Notes)

0.33

0.47

(0.14)

2.21

1.88

0.33

Significant Factors:

Traditional Operating Companies

(0.14)

0.38

Southern Power

0.02

0.01

Parent Company and Other

(0.01)

—

Increase in Shares

(0.01)

(0.06)

Total–As Reported

(0.14)

0.33

Three Months Ended

December

Year-to-Date

December

2014

2013

Change

2014

2013

Change

Consolidated Earnings Per Share–

Excluding Items (See Notes)

0.38

0.48

(0.10)

2.80

2.71

0.09

Total–As Reported

(0.14)

0.33

Estimated Loss on Kemper IGCC

0.02

(0.24)

Leveraged Lease Restructure

—

(0.02)

MC Asset Recovery Insurance Settlement, net

0.02

Total–Excluding Items

(0.10)

0.09

Notes

- For the three and twelve months ended December 31, 2014 and 2013, dilution does not change basic earnings per share by more than 1 cent and is not material.

		Page 5
Southern Company
EPS Earnings Analysis

Description	Three Months Ended December 2014 vs. 2013	Year-to-Date December 2014 vs. 2013

Retail Sales	—¢	3¢

Retail Revenue Impacts	7	23

Weather	—	17

Wholesale Revenues	—	2

Other Operating Revenues	1	2

Non-Fuel O&M	(21)	(33)

Depreciation and Amortization	4	—

Taxes Other Than Income Taxes	(1)	(4)

Other Income and Deductions	—	4

Interest Expense	(1)	—

Income Taxes	(1)	—

Total Traditional Operating Companies	(12)¢	14¢

Southern Power	2	1

Parent and Other	1	—

Increase in Shares	(1)	(6)

Total Change in EPS (x-Items)	(10)¢	9¢

Estimated Loss on Kemper IGCC	(2)	24

Leveraged Lease Restructure	—	2

MC Asset Recovery Insurance Settlement	(2)	(2)

Total Change in EPS (As Reported)	(14)¢	33¢

Notes
- The estimated probable losses relating to Mississippi Power Company's construction of the integrated coal gasification combined cycle facility in Kemper County, Mississippi (Kemper IGCC) significantly impacted the presentation of earnings and earnings per share for the three and twelve months ended December 31, 2014 and 2013 and any similar charges may occur with uncertain frequency.

- The charge related to the restructuring of a leveraged lease investment that was completed on March 1, 2013 impacted the presentation of earnings and earnings per share for the twelve months ended December 31, 2013 and similar charges are not expected to occur with any regularity in the future.

- Earnings for the three and twelve months ended December 31, 2013 include an insurance settlement related to the March 2009 litigation settlement with MC Asset Recovery, LLC and similar insurance recoveries are not expected to occur with any regularity in the future.

- All figures in this earnings release are preliminary and remain subject to the completion of normal quarter-end accounting procedures and adjustments, which could result in changes to these preliminary results. In addition, certain classifications and rounding may be different from final results published in the Form 10-K.

Page 6
Southern Company
Consolidated Earnings
As Reported
*(In Millions of Dollars)*

	Three Months Ended December						Year-to-Date December
	2014		2013		Change		2014		2013		Change
Income Account-
Retail Revenues-
Fuel	$	1,141	$	1,160	$	(19)	$	5,396	$	4,990	$	406
Non-Fuel	2,255		2,144		111		10,186		9,551		635
Wholesale Revenues	465		449		16		2,184		1,855		329
Other Electric Revenues	169		162		7		672		639		33
Non-regulated Operating Revenues	19		12		7		61		52		9
Total Revenues	4,049		3,927		122		18,499		17,087		1,412
Fuel and Purchased Power	1,398		1,388		10		6,677		5,971		706
Non-Fuel O & M	1,330		997		333		4,356		3,846		510
Depreciation and Amortization	424		479		(55)		1,939		1,901		38
Taxes Other Than Income Taxes	235		224		11		986		934		52
Estimated Loss on Kemper IGCC	70		40		30		868		1,180		(312)
Total Operating Expenses	3,457		3,128		329		14,826		13,832		994
Operating Income	592		799		(207)		3,673		3,255		418
Allowance for Equity Funds Used During Construction	63		51		12		245		190		55
Interest Income	5		5		—		19		19		—
Interest Expense, Net of Amounts Capitalized	217		196		21		840		824		16
Other Income (Expense), net	(28)		(36)		8		(62)		(81)		19
Income Taxes	98		192		(94)		987		849		138
Net Income	317		431		(114)		2,048		1,710		338
Dividends on Preferred and Preference Stock of Subsidiaries	17		17		—		68		66		2
NET INCOME AFTER DIVIDENDS ON PREFERRED AND PREFERENCE STOCK	$	300	$	414	$	(114)	$	1,980	$	1,644	$	336

Notes

- Certain prior year data has been reclassified to conform with current year presentation.

Page 7
Southern Company
Kilowatt-Hour Sales
*(In Millions of KWHs)*

	Three Months Ended December						Year-to-Date December
As Reported	2014	2013	Change		Weather Adjusted Change		2014	2013	Change		Weather Adjusted Change
Kilowatt-Hour Sales-
Total Sales	44,775	43,983	1.8	%			194,425	183,401	6.0	%

Total Retail Sales-	37,727	37,535	0.5	%	0.6	%	161,639	156,457	3.3	%	0.9	%
Residential	11,782	11,805	(0.2)	%	(0.2)	%	53,347	50,575	5.5	%	—	%
Commercial	12,349	12,442	(0.8)	%	(0.3)	%	53,242	52,551	1.3	%	(0.4)	%
Industrial	13,369	13,067	2.3	%	2.3	%	54,140	52,429	3.3	%	3.3	%
Other	227	221	2.6	%	2.5	%	910	902	0.9	%	0.7	%

Total Wholesale Sales	7,048	6,448	9.3	%	N/A		32,786	26,944	21.7	%	N/A

Page 8
Southern Company
Financial Overview
As Reported
*(In Millions of Dollars)*

	Three Months Ended December						Year-to-Date December
	2014		2013		% Change		2014		2013		% Change
Consolidated –
Operating Revenues	$	4,049	$	3,927	3.1	%	$	18,499	$	17,087	8.3	%
Earnings Before Income Taxes	415		623		(33.4)	%	3,035		2,559		18.6	%
Net Income Available to Common	300		414		(27.5)	%	1,980		1,644		20.4	%

Alabama Power –
Operating Revenues	$	1,328	$	1,314	1.1	%	$	5,942	$	5,618	5.8	%
Earnings Before Income Taxes	211		237		(11.0)	%	1,312		1,229		6.8	%
Net Income Available to Common	119		140		(15.0)	%	761		712		6.9	%

Georgia Power –
Operating Revenues	$	1,902	$	1,866	1.9	%	$	8,988	$	8,274	8.6	%
Earnings Before Income Taxes	196		335		(41.5)	%	1,971		1,914		3.0	%
Net Income Available to Common	123		208		(40.9)	%	1,225		1,174		4.3	%

Gulf Power –
Operating Revenues	$	361	$	343	5.2	%	$	1,590	$	1,440	10.4	%
Earnings Before Income Taxes	39		44		(12.2)	%	237		212		12.0	%
Net Income Available to Common	23		25		(9.9)	%	140		124		12.7	%

Mississippi Power –
Operating Revenues	$	278	$	268	3.8	%	$	1,275	$	1,145	11.3	%
Earnings (Loss) Before Income Taxes	(29)		1		N/M		(585)		(843)		30.6	%
Net Income (Loss) Available to Common	(7)		13		N/M		(312)		(477)		34.5	%

Southern Power –
Operating Revenues	$	386	$	300	28.7	%	$	1,501	$	1,275	17.7	%
Earnings Before Income Taxes	18		32		(43.4)	%	172		211		(18.7)	%
Net Income Available to Common	44		24		90.8	%	172		166		4.1	%

N/M - not meaningful

Notes

- Mississippi Power Company restated its 2012 financial statements to reflect a pre-tax charge to income for the estimated probable loss on Kemper IGCC of $78 million ($48 million after tax) in 2012. Southern Company evaluated the portion of the estimated probable loss related to 2012 and concluded it was not material to Southern Company. Therefore, Southern Company reflected the pre-tax charge to income for this portion of the estimated probable loss related to 2012 in the first quarter 2013.

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