Southern Company reports third quarter earnings

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Oct 30, 2013, 07:30 ET

ATLANTA, Oct. 30, 2013 /PRNewswire/ -- Southern Company today reported third quarter 2013 earnings of $852 million, or 97 cents per share, compared with earnings of $976 million, or $1.11 per share, in the third quarter of 2012.

For the nine months ended Sept. 30, 2013, Southern Company's earnings were $1.23 billion, or $1.41 per share, compared with earnings of $1.97 billion, or $2.26 per share, for the same period a year ago.

Earnings for the three months and nine months ended Sept. 30, 2013, include after-tax charges of $93 million (11 cents per share) and $704 million (81 cents per share), respectively, related to increased cost estimates for the construction of Mississippi Power's Kemper County project. Earnings for the nine months ended Sept. 30, 2013, also include a $16 million (2 cents per share) after-tax charge related to the restructuring of a leveraged lease investment. Earnings for the nine months ended Sept. 30, 2012, include $21 million (2 cents per share) of insurance recovery related to the March 2009 litigation settlement agreement with MC Asset Recovery, LLC.

Excluding these items, Southern Company earned $945 million, or $1.08 per share, in the third quarter of 2013, compared with earnings of $976 million, or $1.11 per share, during the third quarter of 2012.

For the first nine months of both 2013 and 2012, excluding these items, Southern Company earned $1.95 billion, or $2.24 per share.

Earnings were negatively influenced by cooler-than-normal temperatures and unusually heavy rainfall in the third quarter of 2013 compared with the third quarter of 2012.

"During the past quarter, our service territory experienced its highest level of rainfall in nearly 100 years," said Thomas A. Fanning, Southern Company chairman, president and CEO. "At the same time, cooler temperatures prevailed across our territory. For instance, in metro Atlanta – where we would normally expect to see more than 100 hours of summer temperatures above 90 degrees – we only saw one such hour. This unique combination of circumstances resulted in one of the mildest southeastern summers in the last 20 years."

Third quarter 2013 operating revenues were $5.02 billion, compared with $5.05 billion for the same period in 2012, a decrease of 0.6 percent. Year-to-date 2013 revenues were $13.16 billion, compared with $12.83 billion for the same period in 2012, a 2.5 percent increase.

Kilowatt-hour sales to retail customers in Southern Company's four-state service area decreased 1.5 percent in the third quarter of 2013 compared with the third quarter of 2012. Residential and commercial energy sales decreased 5.3 percent and 1.3 percent, respectively, while industrial energy sales increased 2.6 percent.

For the year to date, retail sales decreased 0.9 percent compared with the same period in 2012. Residential and commercial energy sales decreased 1.4 percent and 1.5 percent, respectively, while industrial energy sales increased 0.4 percent.

Total energy sales to Southern Company's customers in the Southeast, including wholesale sales, decreased 2.9 percent in the third quarter of 2013 compared with the same period in 2012. For the year to date, total energy sales decreased 1.2 percent compared with the same period in 2012.

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/events.cfm. A replay of the webcast only will be available at the site for 12 months.

Southern Company has also posted on its website detailed financial information on its third quarter performance. These materials are available at www.southerncompany.com.

With 4.4 million customers and nearly 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 and listed by DiversityInc as a top company for Blacks. The company received the 2012 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.

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

	Three Months Ended September				Year-to-Date September
	2013		2012		2013		2012
Consolidated Earnings–As Reported
(See Notes)
Traditional Operating Companies	$	766	$	908	$	1,100	$	1,797
Southern Power	85		68		142		144
Total	851		976		1,242		1,941
Parent Company and Other	1		—		(12)		26
Net Income–As Reported	$	852	$	976	$	1,230	$	1,967

Basic Earnings Per Share	$	0.97	$	1.11	$	1.41	$	2.26

Average Shares Outstanding (in millions)	878		876		874		872
End of Period Shares Outstanding (in millions)					882		875

	Three Months Ended September				Year-to-Date September
	2013		2012		2013		2012
Consolidated Earnings–Excluding Items
(See Notes)
Net Income–As Reported	$	852	$	976	$	1,230	$	1,967
Estimated Loss on Kemper IGCC	93		—		704		—
Leveraged Lease Restructure	—		—		16		—
MC Asset Recovery Insurance Settlement, net	—		—		—		(21)
Net Income–Excluding Items	$	945	$	976	$	1,950	$	1,946

Basic Earnings Per Share–Excluding Items	$	1.08	$	1.11	$	2.24	$	2.24

Notes

- For the three months ended September 30, 2013 and 2012, dilution does not change basic earnings per share by more than 1 cent and is not material. For the nine months ended September 30, 2013 and 2012, dilution does not change basic earnings per share by more than 3 cents 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 nine months ended September 30, 2013 and similar charges are not expected to occur with any regularity in the future, although it is possible such charges could recur.

-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 nine months ended September 30, 2013 and similar charges are not expected to occur with any regularity in the future.

- Earnings for the nine months ended September 30, 2012 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.

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

- 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-Q.

Southern Company

Significant Factors Impacting EPS

Three Months Ended

September

Year-to-Date

September

2013

2012

Change

2013

2012

Change

Consolidated Earnings Per Share–

As Reported (See Notes)

0.97

1.11

(0.14)

1.41

2.26

(0.85)

Significant Factors:

Traditional Operating Companies

(0.16)

(0.80)

Southern Power

0.02

—

Parent Company and Other

—

(0.04)

Increase in Shares

—

(0.01)

Total–As Reported

(0.14)

(0.85)

Three Months Ended

September

Year-to-Date

September

2013

2012

Change

2013

2012

Change

Consolidated Earnings Per Share–

Excluding Items (See Notes)

1.08

1.11

(0.03)

2.24

2.24

—

Total–As Reported

(0.14)

(0.85)

Estimated Loss on Kemper IGCC

0.11

0.81

Leveraged Lease Restructure

—

0.02

MC Asset Recovery Insurance Settlement

—

0.02

Total–Excluding Items

(0.03)

—

Notes

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

Southern Company
EPS Earnings Analysis
Three Months Ended September 2013

Cents		Description

1¢		Retail Sales

2		Retail Revenue Impacts

(7)		Weather

(2)		Non-Fuel O&M

(2)		Depreciation and Amortization

2		Other Income and Deductions

1		Interest Expense

(5)¢		Total Traditional Operating Companies

2		Southern Power

(3)¢		Total Change in QTD EPS (x-Items)

(11)		Estimated Loss on Kemper IGCC

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

Notes
- The estimated probable loss 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 months ended September 30, 2013 and similar charges are not expected to occur with any regularity in the future, although it is possible such charges could recur.

- 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-Q.

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

	Three Months Ended September						Year-to-Date September
	2013		2012		Change		2013		2012		Change
Income Account-
Retail Revenues-
Fuel	$	1,435	$	1,445	$	(10)	$	3,830	$	3,709	$	121
Non-Fuel	2,884		2,934		(50)		7,407		7,359		48
Wholesale Revenues	520		497		23		1,406		1,261		145
Other Electric Revenues	166		157		9		477		459		18
Non-regulated Operating Revenues	12		16		(4)		40		46		(6)
Total Revenues	5,017		5,049		(32)		13,160		12,834		326
Fuel and Purchased Power	1,725		1,717		8		4,583		4,362		221
Non-fuel O & M	928		906		22		2,849		2,817		32
MC Asset Recovery Insurance Settlement	—		—		—		—		(19)		19
Depreciation and Amortization	480		449		31		1,422		1,335		87
Taxes Other Than Income Taxes	243		237		6		710		690		20
Estimated Loss on Kemper IGCC	150		—		150		1,140		—		1,140
Total Operating Expenses	3,526		3,309		217		10,704		9,185		1,519
Operating Income	1,491		1,740		(249)		2,456		3,649		(1,193)
Allowance for Equity Funds Used During Construction	53		39		14		139		102		37
Leveraged Lease Income (Loss)	5		5		—		(11)		16		(27)
Interest Expense, Net of Amounts Capitalized	202		218		(16)		628		649		(21)
Other Income (Expense), net	(10)		(4)		(6)		(20)		(4)		(16)
Income Taxes	468		569		(101)		657		1,098		(441)
Net Income	869		993		(124)		1,279		2,016		(737)
Dividends on Preferred and Preference Stock of Subsidiaries	17		17		—		49		49		—
NET INCOME AFTER DIVIDENDS ON PREFERRED AND PREFERENCE STOCK	$	852	$	976	$	(124)	$	1,230	$	1,967	$	(737)

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

- 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-Q.

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

	Three Months Ended September						Year-to-Date September
As Reported (See Notes)	2013	2012	Change		Weather Adjusted Change		2013	2012	Change		Weather Adjusted Change*
Kilowatt-Hour Sales-
Total Sales	51,040	52,586	(2.9)	%			139,418	141,074	(1.2)	%

Total Retail Sales-	43,454	44,137	(1.5)	%	1.0	%	118,922	119,945	(0.9)	%	(0.1)	%
Residential	14,653	15,479	(5.3)	%	(0.3)	%	38,770	39,315	(1.4)	%	(0.5)	%
Commercial	14,836	15,032	(1.3)	%	1.1	%	40,108	40,734	(1.5)	%	—	%
Industrial	13,738	13,394	2.6	%	2.6	%	39,363	39,206	0.4	%	0.4	%
Other	227	232	(1.9)	%	(1.6)	%	681	690	(1.4)	%	(1.4)	%

Total Wholesale Sales	7,586	8,449	(10.2) %			N/A	20,496	21,129	(3.0)	%	N/A


Notes
* Also reflects reclassification of January 2012 KWH sales among customer classes consistent with actual advanced meter data. Use of actual advanced meter data was implemented during the first quarter of 2012.

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

	Three Months Ended September						Year-to-Date September
	2013		2012		% Change		2013		2012		% Change
Consolidated –
Operating Revenues	$	5,017	$	5,049	(0.6)	%	$	13,160	$	12,834	2.5	%
Earnings Before Income Taxes	1,337		1,562		(14.4)	%	1,936		3,114		(37.8)	%
Net Income Available to Common	852		976		(12.7)	%	1,230		1,967		(37.5)	%

Alabama Power –
Operating Revenues	$	1,604	$	1,637	(2.0)	%	$	4,304	$	4,230	1.7	%
Earnings Before Income Taxes	442		474		(6.8)	%	992		1,015		(2.3)	%
Net Income Available to Common	258		280		(7.9)	%	572		591		(3.2)	%

Georgia Power –
Operating Revenues	$	2,484	$	2,498	(0.6)	%	$	6,408	$	6,263	2.3	%
Earnings Before Income Taxes	790		843		(6.3)	%	1,579		1,558		1.3	%
Net Income Available to Common	487		525		(7.2)	%	966		987		(2.1)	%

Gulf Power –
Operating Revenues	$	399	$	422	(5.3)	%	$	1,097	$	1,108	(1.0)	%
Earnings Before Income Taxes	75		80		(5.7)	%	168		172		(2.7)	%
Net Income Available to Common	45		48		(6.3)	%	99		103		(4.1)	%

Mississippi Power –
Operating Revenues	$	325	$	305	6.5	%	$	878	$	800	9.7	%
Earnings Before Income Taxes	(56)		77		N/M		(843)		159		N/M
Net Income Available to Common	(24)		55		N/M		(490)		115		N/M

Southern Power –
Operating Revenues	$	365	$	355	2.8	%	$	975	$	894	9.0	%
Earnings Before Income Taxes	103		102		1.2	%	180		220		(18.4)	%
Net Income Available to Common	85		68		24.5	%	142		144		(1.4)	%

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.

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

- 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-Q.