Southern Company reports second-quarter earnings

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Jul 29, 2015, 07:15 ET

ATLANTA, July 29, 2015 /PRNewswire/ -- Southern Company today reported second-quarter 2015 earnings of $629 million, or 69 cents per share, compared with earnings of $611 million, or 68 cents per share, in the second quarter of 2014. For the six months ended June 30, 2015, earnings were $1.14 billion, or $1.25 per share, compared with $962 million, or $1.08 per share, for the same period in 2014.

Earnings for the three and six months ended June 30, 2015, include after-tax charges of $14 million and $20 million, respectively, related to increased construction estimates for Mississippi Power's Kemper County integrated gasification combined-cycle (IGCC) project. Earnings for the six months ended June 30, 2014, include an after-tax charge of $235 million, or 26 cents per share, related to the Kemper County IGCC project. Earnings for the three and six months ended June 30, 2015, also include a $4 million after-tax charge related to the discontinued operations of Mirant and the March 2009 settlement agreement with MC Asset Recovery, LLC.

Excluding these items, Southern Company earned $647 million, or 71 cents per share, during the second quarter of 2015, compared with earnings of $611 million, or 68 cents per share, during the second quarter of 2014. For the first six months of 2015, excluding these items, Southern Company earned $1.16 billion, or $1.28 per share, compared with earnings of $1.20 billion, or $1.34 per share, for the same period in 2014.

Earnings for the second quarter of 2015 were positively influenced by retail revenue effects at Southern Company's traditional operating companies, warmer weather and stronger than expected performance of its Southern Power subsidiary. Earnings were negatively influenced by increased non-fuel operations and maintenance expenses.

"We are encouraged by positive customer growth during the second quarter of 2015, particularly in the residential sector," said Southern Company Chairman, President and CEO Thomas A. Fanning. "Also, for the first time since 2004, we have experienced two consecutive quarters of weather-normalized growth in all three customer classes – residential, commercial and industrial – as our region continues to grow faster than the U.S. as a whole."

Second-quarter 2015 operating revenues were $4.34 billion, compared with $4.47 billion for the second quarter of 2014, a decrease of 2.9 percent. For the six months ended June 30, 2015, operating revenues were $8.52 billion, compared with $9.11 billion for the same period in 2014, a decrease of 6.5 percent.

Kilowatt-hour sales to retail customers in Southern Company's four-state service area increased 2.2 percent in the second quarter of 2015, compared with the second quarter of 2014. Residential energy sales increased 4.6 percent, commercial energy sales increased 2.3 percent and industrial energy sales increased 0.1 percent. For the first six months of 2015, retail sales increased 0.5 percent, compared with the same period in 2014. Residential energy sales decreased 0.2 percent, commercial energy sales increased 0.7 percent and industrial energy sales increased 1.0 percent.

Weather-adjusted kilowatt-hour sales to retail customers in Southern Company's four-state service area increased 0.7 percent in the second quarter of 2015, compared with the second quarter of 2014. Weather-adjusted residential energy sales increased 1.2 percent, weather-adjusted commercial energy sales increased 0.7 percent and industrial energy sales increased 0.2 percent. For the first six months of 2015, weather-adjusted retail sales increased 0.8 percent, compared with the same period in 2014. Weather-adjusted residential energy sales increased 0.7 percent, weather-adjusted commercial energy sales increased 0.7 percent and industrial energy sales increased 1.1 percent.

Total energy sales to Southern Company's customers in the Southeast, including wholesale sales, increased 2.1 percent in the second quarter of 2015, compared with the second quarter of 2014. For the first six months of 2015, total energy sales decreased 0.6 percent, compared with the same period in 2014.

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 second quarter 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 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, 21st 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 by 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 June				Year-to-Date June
	2015		2014		2015		2014
Consolidated Earnings–As Reported
(See Notes)
Traditional Operating Companies	$	561	$	580	$	1,038	$	899
Southern Power	46		31		79		64
Total	607		611		1,117		963
Parent Company and Other	22		—		21		(1)
Net Income–As Reported	$	629	$	611	$	1,138	$	962

Basic Earnings Per Share	$	0.69	$	0.68	$	1.25	$	1.08

Average Shares Outstanding (in millions)	909		895		910		892
End of Period Shares Outstanding (in millions)					908		896

	Three Months Ended June				Year-to-Date June
	2015		2014		2015		2014
Consolidated Earnings–Excluding Items
(See Notes)
Net Income–As Reported	$	629	$	611	$	1,138	$	962
Estimated Loss on Kemper IGCC	14		—		20		235
Additional MCAR settlement costs	4		—		4		—
Net Income–Excluding Items	$	647	$	611	$	1,162	$	1,197

Basic Earnings Per Share–Excluding Items	$	0.71	$	0.68	$	1.28	$	1.34

Notes

- For the three and six months ended June 30, 2015 and 2014, 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 six months ended June 30, 2015 and the six months ended June 30, 2014. Similar charges may occur with uncertain frequency.

- 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

June

Year-to-Date
June

2015

2014

Change

2015

2014

Change

Consolidated Earnings Per Share–

As Reported (See Notes)

0.69

0.68

0.01

1.25

1.08

0.17

Significant Factors:

Traditional Operating Companies

(0.02)

0.16

Southern Power

0.02

Parent Company and Other

0.02

Increase in Shares

(0.01)

(0.03)

Total–As Reported

0.01

0.17

Three Months Ended

June

Year-to-Date
June

2015

2014

Change

2015

2014

Change

Consolidated Earnings Per Share–

Excluding Items (See Notes)

0.71

0.68

0.03

1.28

1.34

(0.06)

Total–As Reported

0.01

0.17

Estimated Loss on Kemper IGCC

0.02

(0.24)

Additional MCAR settlement costs

—

0.01

Total–Excluding Items

0.03

(0.06)

Notes

- For the three and six months ended June 30, 2015 and 2014, dilution does not change basic earnings per share by more than 1 cent and is not material.

- Earnings for the three and six months ended June 30, 2015 include additional costs related to the discontinued operations of Mirant Corporation and the March 2009 litigation settlement with MC Asset Recovery, LLC. Further charges are not expected to occur. These costs were the same for the three and six months ended June 30, 2015; however, these costs on a per share basis differ between the periods due to the effects of rounding.


Southern Company
EPS Earnings Analysis
Three Months Ended June 2015 vs. June 2014

Cents	Description

1¢	Retail Sales

3	Retail Revenue Impacts

3	Weather

(1)	Wholesale Operations

(1)	Other Operating Revenues

(5)	Non-Fuel O&M

1	Depreciation and Amortization

(3)	Other Income and Deductions

2	Interest Expense

—¢	Total Traditional Operating Companies

2	Southern Power

2	Parent and Other

(1)	Increase in Shares

3¢	Total Change in QTD EPS (Excluding Items)

(2)	Estimated Loss on Kemper IGCC

1¢	Total Change in QTD 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) impacted the presentation of earnings per share for the three months ended June 30, 2015 and any similar charges may occur with uncertain frequency.

- 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 June						Year-to-Date June
	2015		2014		Change		2015		2014		Change
Income Account-
Retail Revenues-
Fuel	$	1,130	$	1,296	$	(166)	$	2,218	$	2,772	$	(554)
Non-Fuel	2,584		2,474		110		5,038		4,856		182
Wholesale Revenues	448		515		(67)		915		1,119		(204)
Other Electric Revenues	162		169		(7)		325		334		(9)
Other Revenues	13		13		—		24		30		(6)
Total Revenues	4,337		4,467		(130)		8,520		9,111		(591)
Fuel and Purchased Power	1,371		1,595		(224)		2,727		3,429		(702)
Non-Fuel O & M	1,100		1,019		81		2,222		2,005		217
Depreciation and Amortization	500		504		(4)		987		1,001		(14)
Taxes Other Than Income Taxes	245		246		(1)		497		493		4
Estimated Loss on Kemper IGCC	23		—		23		32		380		(348)
Total Operating Expenses	3,239		3,364		(125)		6,465		7,308		(843)
Operating Income	1,098		1,103		(5)		2,055		1,803		252
Allowance for Equity Funds Used During Construction	39		62		(23)		102		119		(17)
Interest Expense, Net of Amounts Capitalized	180		210		(30)		393		416		(23)
Other Income (Expense), net	(12)		(6)		(6)		(19)		(13)		(6)
Income Taxes	302		321		(19)		576		497		79
Net Income	643		628		15		1,169		996		173
Dividends on Preferred and Preference Stock of Subsidiaries	14		17		(3)		31		34		(3)
NET INCOME AFTER DIVIDENDS ON PREFERRED AND PREFERENCE STOCK	$	629	$	611	$	18	$	1,138	$	962	$	176

Notes

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


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

	Three Months Ended June						Year-to-Date June
As Reported	2015	2014	Change		Weather Adjusted Change*		2015	2014	Change		Weather Adjusted Change*
Kilowatt-Hour Sales-
Total Sales	47,878	46,903	2.1	%			94,123	94,705	(0.6)	%

Total Retail Sales-	40,072	39,198	2.2	%	0.7	%	79,281	78,897	0.5	%	0.8	%
Residential	12,548	12,001	4.6	%	1.2	%	26,125	26,175	(0.2)	%	0.7	%
Commercial	13,654	13,343	2.3	%	0.7	%	26,069	25,891	0.7	%	0.7	%
Industrial	13,645	13,629	0.1	%	0.2	%	26,633	26,378	1.0	%	1.1	%
Other	225	225	(0.3)	%	(0.4)	%	454	453	0.2	%	0.2	%

Total Wholesale Sales	7,806	7,705	1.3	%	N/A		14,842	15,808	(6.1)	%	N/A

Note

*Also reflects adjustment of 2014 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 June						Year-to-Date June
	2015		2014		% Change		2015		2014		% Change
Consolidated –
Operating Revenues	$	4,337	$	4,467	(2.9)	%	$	8,520	$	9,111	(6.5)	%
Earnings Before Income Taxes	945		949		(0.4)	%	1,745		1,493		16.9	%
Net Income Available to Common	629		611		2.9	%	1,138		962		18.3	%

Alabama Power –
Operating Revenues	$	1,455	$	1,437	1.3	%	$	2,856	$	2,945	(3.0)	%
Earnings Before Income Taxes	329		302		8.9	%	621		626		(0.8)	%
Net Income Available to Common	200		173		15.6	%	369		360		2.5	%

Georgia Power –
Operating Revenues	$	2,016	$	2,186	(7.8)	%	$	3,994	$	4,455	(10.3)	%
Earnings Before Income Taxes	462		493		(6.3)	%	842		929		(9.4)	%
Net Income Available to Common	277		311		(10.9)	%	513		577		(11.1)	%

Gulf Power –
Operating Revenues	$	384	$	384	—	%	$	741	$	791	(6.3)	%
Earnings Before Income Taxes	59		58		1.7	%	121		120		0.8	%
Net Income Available to Common	35		34		2.9	%	72		71		1.4	%

Mississippi Power –
Operating Revenues	$	275	$	311	(11.6)	%	$	552	$	642	(14.0)	%
Earnings (Loss) Before Income Taxes	66		79		(16.5)	%	105		(223)		N/M
Net Income (Loss) Available to Common	49		62		(21.0)	%	84		(110)		N/M

Southern Power –
Operating Revenues	$	337	$	329	2.4	%	$	684	$	680	0.6	%
Earnings Before Income Taxes	53		29		82.8	%	98		66		48.5	%
Net Income Available to Common	46		31		48.4	%	79		64		23.4	%