Southern Company third quarter earnings reflect mild weather, uncertain economy

Nov 05, 2012, 07:30 ET from Southern Company

ATLANTA, Nov. 5, 2012 /PRNewswire/ -- Southern Company (NYSE: SO) today reported third quarter earnings of $976 million, or $1.11 a share, compared with $916 million, or $1.07 a share, for the same period a year ago.

For the nine months ended Sept. 30, 2012, Southern Company's earnings were $1.97 billion, or $2.26 a share, compared with $1.94 billion, or $2.27 a share, for the same period a year ago.

Earnings for the nine months ended Sept. 30, 2012, included 2 cents a share of insurance recovery related to the March 2009 settlement agreement with MC Asset Recovery, LLC to resolve a lawsuit arising out of the 2003 bankruptcy of Mirant Corp., a Southern Company subsidiary until its 2001 spinoff.  Excluding the impact of that recovery, Southern Company earned $2.24 a share for the first nine months of 2012, compared with $2.27 a share for the first nine months of 2011. 

Operating revenues for the third quarter of 2012 were $5.05 billion, compared with $5.43 billion for the same period a year ago, a 7.0 percent decrease. For the first nine months of 2012, operating revenues were $12.83 billion, compared with $13.96 billion for the same period last year, an 8.1 percent decrease. The third quarter and year-to-date decreases were primarily due to lower fuel costs that were passed through to customers.

Earnings for the third quarter of 2012 were negatively influenced by milder-than-normal weather as compared to warmer-than-normal weather for the same period in 2011. This effect was offset by reductions in non-fuel operations and maintenance expenses and by other revenue effects across the company's traditional operating units.

"After a promising first six months of 2012, the economy has slowed due to uncertainty around the elections, the fiscal cliff and the slowing world economy," said Thomas A. Fanning, Southern Company chairman, president and CEO. "Until these issues are resolved, the near-term outlook for the national economy will be unclear. We continue to believe that the long-term prospects for the Southeast remain strong relative to other portions of the country."

Retail kilowatt-hour sales in Southern Company's four-state service territory decreased 4.0 percent in the third quarter of 2012 compared with the third quarter of 2011. Residential and commercial sales – which were affected by milder weather during the third quarter of 2012 compared to the third quarter of 2011 – decreased 7.2 percent and 2.4 percent, respectively, while industrial sales decreased 1.9 percent.

For the year to date, kilowatt-hour sales to retail customers decreased 3.7 percent compared with the same period a year ago. Residential sales decreased 8.3 percent, commercial sales decreased 2.3 percent and industrial sales decreased 0.1 percent.

Total energy sales to Southern Company's customers in the Southeast, including wholesale sales, decreased 4.9 percent in the third quarter of 2012 compared with the same period in 2011. On a year-to-date basis, total energy sales decreased 5.0 percent compared with the same period in 2011.

Southern Company's financial analyst call will begin at 11 a.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 more than 43,000 megawatts of generating capacity, Atlanta-based Southern Company (NYSE: SO) is the premier energy company serving the Southeast. 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 is leading the nation's nuclear renaissance through the construction of the first new nuclear units to be built in a generation of Americans and is demonstrating its commitment to energy innovation through development of a state-of-the-art coal gasification plant. Southern Company has been recognized by the U.S. Department of Defense and GI 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 Platts' 2011 Power Company of the Year 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.

Cautionary Note Regarding Forward-Looking Statements:

Certain information contained in this release is forward-looking information based on current expectations and plans that involve risks and uncertainties. Forward-looking information includes, among other things, statements concerning the economy and customer growth. Southern Company cautions that there are certain factors that can cause actual results to differ materially from the forward-looking information that has been provided. The reader is cautioned not to put undue reliance on this forward-looking information, which is not a guarantee of future performance and is subject to a number of uncertainties and other factors, many of which are outside the control of Southern Company; accordingly, there can be no assurance that such suggested results will be realized. The following factors, in addition to those discussed in Southern Company's Annual Report on Form 10-K for the year ended December 31, 2011, and subsequent securities filings, could cause actual results to differ materially from management expectations as suggested by such forward-looking information: the impact of recent and future federal and state regulatory changes, including legislative and regulatory initiatives regarding deregulation and restructuring of the electric utility industry, implementation of the Energy Policy Act of 2005, environmental laws including regulation of water, coal combustion byproducts, and emissions of sulfur, nitrogen, carbon, soot, particulate matter, hazardous air pollutants, including mercury, and other substances, financial reform legislation, and also changes in tax and other laws and regulations to which Southern Company and its subsidiaries are subject, as well as changes in application of existing laws and regulations; current and future litigation, regulatory investigations, proceedings, or inquiries, including the pending Environmental Protection Agency civil actions against certain Southern Company subsidiaries, Federal Energy Regulatory Commission matters, and Internal Revenue Service and state tax audits; the effects, extent, and timing of the entry of additional competition in the markets in which Southern Company's subsidiaries operate; variations in demand for electricity, including those relating to weather, the general economy and recovery from the recent recession, population and business growth (and declines), the effects of energy conservation measures, and any potential economic impacts resulting from federal budgetary decisions; available sources and costs of fuels; effects of inflation; ability to control costs and avoid cost overruns during the development and construction of facilities, which includes projects involving facility designs that have not been finalized or previously constructed; investment performance of Southern Company's employee benefit plans and nuclear decommissioning trust funds; advances in technology; state and federal rate regulations and the impact of pending and future rate cases and negotiations, including rate actions relating to fuel and other cost recovery mechanisms; regulatory approvals and actions related to the Plant Vogtle expansion, including Georgia Public Service Commission approvals, Nuclear Regulatory Commission actions, and potential U.S. Department of Energy loan guarantees; regulatory approvals and actions related to the Kemper County integrated coal gasification combined cycle facility, including Mississippi Public Service Commission approvals, potential U.S. Department of Energy loan guarantees, the South Mississippi Electric Power Association purchase decision, satisfaction of requirements to utilize investment tax credits and grants, and the outcome of any further proceedings regarding the Mississippi Public Service Commission's issuance of the certificate of public convenience and necessity; the performance of projects undertaken by the non-utility businesses and the success of efforts to invest in and develop new opportunities; internal restructuring or other restructuring options that may be pursued; potential business strategies, including acquisitions or dispositions of assets or businesses, which cannot be assured to be completed or beneficial to Southern Company or its subsidiaries; the ability of counterparties of Southern Company and its subsidiaries to make payments as and when due and to perform as required; the ability to obtain new short- and long-term contracts with wholesale customers; the direct or indirect effect on the Southern Company system's business resulting from terrorist incidents and the threat of terrorist incidents, including cyber intrusion; interest rate fluctuations and financial market conditions and the results of financing efforts, including Southern Company's and its subsidiaries' credit ratings; the impacts of any potential U.S. credit rating downgrade or other sovereign financial issues, including impacts on interest rates, access to capital markets, impacts on currency exchange rates, counterparty performance, and the economy in general, as well as potential impacts on the availability or benefits of proposed U.S. Department of Energy loan guarantees; the ability of Southern Company and its subsidiaries to obtain additional generating capacity at competitive prices; catastrophic events such as fires, earthquakes, explosions, floods, hurricanes, droughts, pandemic health events such as influenzas, or other similar occurrences; the direct or indirect effects on the Southern Company system's business resulting from incidents affecting the U.S. electric grid or operation of generating resources; and the effect of accounting pronouncements issued periodically by standard setting bodies. Southern Company expressly disclaims any obligation to update any forward-looking information.

 

 Southern Company 

 Financial Highlights 

 (In Millions of Dollars Except Earnings Per Share) 

 Three Months Ended September 

 Year-to-Date September 

2012

2011

2012

2011

Consolidated Earnings–As Reported

(See Notes)

   Traditional Operating Companies

$

908

$

862

$

1,797

$

1,804

   Southern Power

68

56

144

138

   Total

976

918

1,941

1,942

   Parent Company and Other

-

(2)

26

-

   Net Income–As Reported

$

976

$

916

$

1,967

$

1,942

   Basic Earnings Per Share 

$

1.11

$

1.07

$

2.26

$

2.27

   Average Shares Outstanding (in millions)

876

860

872

854

   End of Period Shares Outstanding (in millions)

875

862

 Three Months Ended September 

 Year-to-Date September 

2012

2011

2012

2011

Consolidated Earnings–Excluding Items

(See Notes)

   Net Income–As Reported

$

976

$

916

$

1,967

$

1,942

   MC Asset Recovery Insurance Settlement, net

-

-

(21)

-

   Net Income–Excluding Items

$

976

$

916

$

1,946

$

1,942

   Basic Earnings Per Share–Excluding Items

$

1.11

$

1.07

$

2.24

$

2.27

Notes

- For the three months and nine months ended September 30, 2012 and 2011, dilution does not change basic earnings per share by more than 3 cents and is not material.

- In March 2009, Southern Company recorded a charge related to a settlement agreement with MC Asset Recovery, LLC (MCAR) to settle a lawsuit.  

Southern Company filed an insurance claim for a portion of the MCAR settlement amount.  In June 2012, Southern Company received an insurance 

recovery related to this claim.  Earnings for the nine months ended September 30, 2012 include 2 cents a share for the MCAR insurance recovery.

- 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 

2012

2011

Change

2012

2011

Change

Consolidated Earnings Per Share–

As Reported (See Notes)

$1.11

$1.07

$

0.04

$2.26

$2.27

$

(0.01)

   Significant Factors:

   Traditional Operating Companies

0.05

(0.01)

   Southern Power

0.01

0.01

   Parent Company and Other

-

0.03

   Additional Shares

(0.02)

(0.04)

   Total–As Reported

$

0.04

$

(0.01)

 Three Months Ended September 

 Year-to-Date September 

2012

2011

Change

2012

2011

Change

Consolidated Earnings Per Share–

Excluding Items (See Notes)

$1.11

$1.07

$

0.04

$2.24

$2.27

$

(0.03)

   Total–As Reported

0.04

(0.01)

   MC Asset Recovery Insurance Settlement

0.00

(0.02)

   Total–Excluding Items

$

0.04

$

(0.03)

Notes

- For the three months and nine months ended September 30, 2012 and 2011, dilution does not change basic earnings per share by more than 3 cents and is not material.

- In March 2009, Southern Company recorded a charge related to a settlement agreement with MC Asset Recovery, LLC (MCAR) to settle a lawsuit.  

Southern Company filed an insurance claim for a portion of the MCAR settlement amount.  In June 2012, Southern Company received an insurance 

recovery related to this claim.  Earnings for the nine months ended September 30, 2012 include 2 cents a share for the MCAR insurance recovery.

- 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

EPS Earnings Analysis

Three Months Ended September 2012

Cents

Description

(3)¢

Retail Sales

9

Retail Revenue Impacts

(7)

Weather

7

Non-Fuel Expenses

(1)

Depreciation and Amortization

(1)

Interest Expense

1

Income Taxes

Total Traditional Operating Companies

1

Southern Power

(2)

Increase in Shares

Total Change in QTD EPS

Notes

- 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 

 (In Millions of Dollars) 

Three Months Ended September

Year-to-Date September

2012

2011

Change

2012

2011

Change

Income Account-

Retail Revenues-

   Fuel

$

1,445

$

1,748

$

(303)

$

3,709

$

4,542

$

(833)

   Non-Fuel

2,934

2,945

(11)

7,359

7,389

(30)

Wholesale Revenues

497

557

(60)

1,261

1,513

(252)

Other Electric Revenues

157

161

(4)

459

464

(5)

Non-regulated Operating Revenues

16

17

(1)

46

53

(7)

Total Revenues

5,049

5,428

(379)

12,834

13,961

(1,127)

Fuel and Purchased Power

1,717

2,123

(406)

4,362

5,517

(1,155)

Non-fuel O & M

906

983

(77)

2,817

2,837

(20)

MC Asset Recovery Insurance Settlement

0

0

0

(19)

0

(19)

Depreciation and Amortization 

449

431

18

1,335

1,279

56

Taxes Other Than Income Taxes

237

239

(2)

690

686

4

Total Operating Expenses

3,309

3,776

(467)

9,185

10,319

(1,134)

Operating Income

1,740

1,652

88

3,649

3,642

7

Allowance for Equity Funds Used During Construction

39

42

(3)

102

113

(11)

Interest Expense, Net of Amounts Capitalized

218

217

1

649

638

11

Other Income (Expense), net

1

(1)

2

12

(3)

15

Income Taxes

569

543

26

1,098

1,123

(25)

Net Income

993

933

60

2,016

1,991

25

Dividends on Preferred and Preference Stock of Subsidiaries

17

17

0

49

49

0

NET INCOME AFTER DIVIDENDS ON PREFERRED

   AND PREFERENCE STOCK (See Notes)

$

976

$

916

$

60

$

1,967

$

1,942

$

25

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

Weather

Weather

Adjusted

Adjusted

As Reported (See Notes)

2012

2011

Change

Change

2012

2011

Change

Change

Kilowatt-Hour Sales-

Total Sales

52,586

55,291

-4.9%

141,074

148,489

-5.0%

Total Retail Sales-

44,137

45,970

-4.0%

-1.4%

119,945

124,519

-3.7%

-0.1%

   Residential

15,479

16,678

-7.2%

-2.1%

39,315

42,894

-8.3%

-0.1%

   Commercial

15,032

15,401

-2.4%

-0.1%

40,734

41,673

-2.3%

0.0%

   Industrial

13,394

13,658

-1.9%

-1.9%

39,206

39,247

-0.1%

-0.1%

   Other

232

233

-0.8%

-0.5%

690

705

-2.1%

-1.6%

Total Wholesale Sales

8,449

9,321

-9.4%

N/A

21,129

23,970

-11.9%

N/A

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 

 Financial Overview 

 (In Millions of Dollars) 

 Three Months Ended September 

 Year-to-Date September 

2012

2011

% Change

2012

2011

% Change

Consolidated –

Operating Revenues

$5,049

$5,428

-7.0%

$12,834

$13,961

-8.1%

Earnings Before Income Taxes

1,562

1,476

5.8%

3,114

3,114

0.0%

Net Income Available to Common

976

916

6.6%

1,967

1,942

1.3%

Alabama Power –

Operating Revenues

$1,637

$1,671

-2.0%

$4,230

$4,431

-4.5%

Earnings Before Income Taxes

474

454

4.4%

1,015

1,043

-2.7%

Net Income Available to Common

280

264

6.1%

591

606

-2.5%

Georgia Power –

Operating Revenues

$2,498

$2,788

-10.4%

$6,263

$7,042

-11.1%

Earnings Before Income Taxes

843

827

1.9%

1,558

1,631

-4.5%

Net Income Available to Common

525

520

1.0%

987

1,035

-4.6%

Gulf Power –

Operating Revenues

$422

$468

-9.9%

$1,108

$1,192

-7.0%

Earnings Before Income Taxes

80

68

16.6%

172

143

20.1%

Net Income Available to Common

48

41

15.9%

103

86

19.9%

Mississippi Power –

Operating Revenues

$305

$326

-6.2%

$800

$875

-8.6%

Earnings Before Income Taxes

77

57

34.6%

159

117

34.9%

Net Income Available to Common

55

38

43.7%

115

78

47.5%

Southern Power –

Operating Revenues

$355

$363

-2.1%

$894

$950

-5.8%

Earnings Before Income Taxes

102

89

14.5%

220

216

1.9%

Net Income Available to Common

68

56

21.9%

144

138

4.2%

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.

 

SOURCE Southern Company



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