Southern Company reports first-quarter earnings

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Apr 27, 2016, 07:30 ET

ATLANTA, April 27, 2016 /PRNewswire/ -- Southern Company today reported first-quarter 2016 earnings of $485 million, or 53 cents per share, compared with earnings of $508 million, or 56 cents per share, in the first quarter of 2015.

Earnings for the first quarter of 2016 include after-tax charges of $33 million, or 4 cents per share, related to an increased cost estimate for the construction of Mississippi Power's Kemper integrated gasification combined cycle (IGCC) project. First-quarter earnings for 2015 included an after-tax charge of $6 million for the Kemper IGCC project. Earnings for the first quarter of 2016 also include an after-tax charge of $14 million, or 1 cent per share, related to the proposed acquisitions of AGL Resources and PowerSecure International. Excluding these items, Southern Company earned $532 million, or 58 cents per share, during the first quarter of 2016, compared with earnings of $514 million, or 56 cents per share, in the first quarter of 2015.

Earnings drivers year-over-year for the first quarter of 2016 included retail revenue effects across the regulated operating companies and lower non-fuel operating and maintenance costs offset by mild weather and higher depreciation expenses. Wholesale subsidiary Southern Power also contributed positively year-over-year as a result of the anticipated tax benefits for 2016 renewable projects and increased revenue from 2015 renewable projects.

"Southern Company performed superbly in executing its business plan in the first quarter of 2016. We saw positive customer growth, along with strong residential and commercial sales and a robust economic development pipeline," said Southern Company Chairman, President and CEO, Thomas A. Fanning. "Our franchise operations and our competitive generation subsidiary, Southern Power, continue to perform at a high level and deliver on our core strategy of providing clean, safe, reliable and affordable energy to customers."

First-quarter 2016 operating revenues were $3.97 billion, compared with operating revenues of $4.18 billion for the same period in 2015, a decrease of 5.2 percent. This decrease was primarily due to lower fuel costs.

Kilowatt-hour sales to retail customers in Southern Company's four-state service area decreased 3.0 percent in the first quarter of 2016, compared with the first quarter of 2015. Residential energy sales decreased 7.2 percent, commercial energy sales decreased 0.7 percent and industrial energy sales decreased 0.8 percent.

Weather-adjusted kilowatt-hour sales to retail customers in Southern Company's four-state service area increased 0.4 percent in the first quarter of 2016, compared with the first quarter of 2015. Weather-adjusted residential energy sales increased 1.4 percent and weather-adjusted commercial energy sales increased 0.8 percent.

Total energy sales to the Southern Company system's customers, including wholesale sales, decreased 1.7 percent in the first quarter of 2016, compared with the same period in 2015.

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 first-quarter 2016 earnings performance. These materials are available at www.southerncompany.com.

With more than 4.5 million customers and approximately 44,000 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 excellent customer service, high reliability and affordable prices that are below the national average. Through an industry-leading commitment to innovation, Southern Company and its subsidiaries are inventing America's energy future by developing the full portfolio of energy resources, including nuclear, 21^st century coal, natural gas, renewables and energy efficiency, and creating new products and services for the benefit of customers. Southern Company has been named by the U.S. Department of Defense and G.I. Jobs magazine as a top military employer, listed by Black Enterprise magazine as one of the 40 Best Companies for Diversity and designated a 2014 Top Employer for Hispanics by Hispanic Network. The company earned the 2014 National Award of Nuclear Science and History from the National Atomic Museum Foundation for its leadership and commitment to nuclear development, 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 March
	2016		2015
Consolidated Earnings–As Reported
(See Notes)
Traditional Operating Companies	$	464	$	477
Southern Power	50		33
Total	514		510
Parent Company and Other	(29)		(2)
Net Income–As Reported	$	485	$	508

Basic Earnings Per Share	$	0.53	$	0.56

Average Shares Outstanding (in millions)	916		910
End of Period Shares Outstanding (in millions)	918		908

	Three Months Ended March
	2016		2015
Consolidated Earnings–Excluding Items
(See Notes)
Net Income–As Reported	$	485	$	508
Estimated Loss on Kemper IGCC	33		6
Acquisition Costs	14		—
Net Income–Excluding Items	$	532	$	514

Basic Earnings Per Share–Excluding Items	$	0.58	$	0.56

Notes
- For the three months ended March 31, 2016 and 2015, 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 months ended March 31, 2016 and any similar charges may occur with uncertain frequency.

- Earnings for the three months ended March 31, 2016 include costs related to the proposed acquisitions of AGL Resources Inc. and PowerSecure International, Inc. Further costs are expected to continue to occur in connection with closing the proposed acquisitions and supporting the related integrations.

- 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

March

2016

2015

Change

Consolidated Earnings Per Share–

As Reported (See Notes)

0.53

0.56

(0.03)

Significant Factors:

Traditional Operating Companies

(0.02)

Southern Power

0.02

Parent Company and Other

(0.03)

Total–As Reported

(0.03)

Three Months Ended

March

2016

2015

Change

Consolidated Earnings Per Share–

Excluding Items (See Notes)

0.58

0.56

0.02

Total–As Reported

(0.03)

Estimated Loss on Kemper IGCC

0.04

Acquisition Costs

0.01

Total–Excluding Items

0.02

Notes

- For the three months ended March 31, 2016 and 2015, 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 months ended March 31, 2016 and any similar charges may occur with uncertain frequency.

- Earnings for the three months ended March 31, 2016 include costs related to the proposed acquisitions of AGL Resources Inc. and PowerSecure International, Inc. Further costs are expected to continue to occur in connection with closing the proposed acquisitions and supporting the related integrations.

- 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 March 2016 vs. March 2015

Cents	Description

1¢	Retail Sales

8	Retail Revenue Impacts

(6)	Weather

(1)	Wholesale Operations

1	Other Operating Revenues

4	Non-Fuel O&M

(3)	Depreciation and Amortization

(1)	Other Income and Deductions

(1)	Interest Expense

2¢	Total Traditional Operating Companies

2	Southern Power

(2)	Parent and Other

2¢	Total Change in EPS (Excluding Items)

(4)	Estimated Loss on Kemper IGCC

(1)	Acquisition Costs

(3)¢	Total Change in EPS (As Reported)

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 months ended March 31, 2016 and any similar charges may occur with uncertain frequency.

- Earnings for the three months ended March 31, 2016 include costs related to the proposed acquisitions of AGL Resources Inc. and PowerSecure International, Inc. Further costs are expected to continue to occur in connection with closing the proposed acquisitions and supporting the related integrations.

- 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 March
	2016		2015		Change
Income Account-
Retail Revenues-
Fuel	$	875	$	1,088	$	(213)
Non-Fuel	2,502		2,454		48
Wholesale Revenues	396		467		(71)
Other Electric Revenues	181		163		18
Other Revenues	11		11		—
Total Revenues	3,965		4,183		(218)
Fuel and Purchased Power	1,076		1,356		(280)
Non-Fuel O & M	1,109		1,122		(13)
Depreciation and Amortization	541		487		54
Taxes Other Than Income Taxes	256		252		4
Estimated Loss on Kemper IGCC	53		9		44
Total Operating Expenses	3,035		3,226		(191)
Operating Income	930		957		(27)
Allowance for Equity Funds Used During Construction	53		63		(10)
Interest Expense, Net of Amounts Capitalized	246		213		33
Other Income (Expense), net	(18)		(8)		(10)
Income Taxes	222		274		(52)
Consolidated Net Income	497		525		(28)
Less:
Dividends on Preferred and Preference Stock of Subsidiaries	11		17		(6)
Net Income Attributable to Noncontrolling Interests	1		—		1
CONSOLIDATED NET INCOME ATTRIBUTABLE TO SOUTHERN COMPANY	$	485	$	508	$	(23)

Notes
- Certain prior year data may have 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 March
As Reported	2016	2015	Change		Weather Adjusted Change*
Kilowatt-Hour Sales-
Total Sales	45,476	46,244	(1.7)	%

Total Retail Sales-	38,038	39,209	(3.0)	%	0.4	%
Residential	12,602	13,577	(7.2)	%	1.4	%
Commercial	12,323	12,415	(0.7)	%	0.8	%
Industrial	12,888	12,988	(0.8)	%	(1.0)	%
Other	225	229	(1.7)	%	(1.5)	%

Total Wholesale Sales	7,438	7,035	5.7	%	N/A

Note
*Also reflects adjustment of 2015 KWH sales consistent with Mississippi Power's updated methodology to estimate the unbilled revenue allocation among customer classes implemented in the first quarter 2015.

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

	Three Months Ended March
	2016		2015		% Change
Consolidated –
Operating Revenues	$	3,965	$	4,183	(5.2)	%
Earnings Before Income Taxes	719		799		(10.0)	%
Net Income Available to Common	485		508		(4.5)	%

Alabama Power –
Operating Revenues	$	1,331	$	1,401	(5.0)	%
Earnings Before Income Taxes	262		292		(10.3)	%
Net Income Available to Common	155		169		(8.3)	%

Georgia Power –
Operating Revenues	$	1,872	$	1,978	(5.4)	%
Earnings Before Income Taxes	432		380		13.7	%
Net Income Available to Common	268		236		13.6	%

Gulf Power –
Operating Revenues	$	335	$	357	(6.2)	%
Earnings Before Income Taxes	51		62		(17.7)	%
Net Income Available to Common	29		37		(21.6)	%

Mississippi Power –
Operating Revenues	$	257	$	276	(6.9)	%
Earnings (Loss) Before Income Taxes	1		39		(97.4)	%
Net Income (Loss) Available to Common	11		35		(68.6)	%

Southern Power –
Operating Revenues	$	315	$	348	(9.5)	%
Earnings Before Income Taxes	28		45		(37.8)	%
Net Income Available to Common	50		33		51.5	%

Note
- 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.