Southern Company Reports Third Quarter Earnings

Oct 27, 2010, 07:30 ET from Southern Company

ATLANTA, Oct. 27 /PRNewswire-FirstCall/ -- Southern Company (NYSE: SO) today reported third quarter earnings of $817.2 million, or 98 cents a share, compared with $790.0 million, or 99 cents a share, for the same period a year ago.

For the nine months ended Sept. 30, Southern Company's earnings were $1.82 billion, or $2.20 a share, compared with $1.39 billion, or $1.77 a share, for the same period a year ago.

Earnings for the nine months ended Sept. 30, 2009, included a charge of 25 cents a share, or $202 million, related to a 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 spin-off.  Excluding the impact of the 2009 settlement, Southern Company earned $2.20 a share for the first nine months of 2010, compared with $2.02 a share for the same period in 2009.

Revenues for the third quarter were $5.32 billion, compared with $4.68 billion for the same period a year ago, a 13.6 percent increase. For the first nine months of the year, revenues totaled $13.68 billion, compared with $12.23 billion for the same period a year ago, an increase of 11.9 percent.

Warmer-than-normal weather for the period and a stronger-than-expected recovery in the industrial sector positively influenced third quarter earnings, as evidenced by increases in electricity usage and sales. Industrial sales benefited from an increase in exports, with those sales performing at 94 percent of pre-recession levels during the third quarter of 2010.

"While our residential and commercial customers continue to face challenges, the growing strength of our industrial base confirms the Southeast as one of the strongest economies in the U.S.," said Southern Company Chief Executive Officer David M. Ratcliffe. "As the region begins to make slow strides toward recovery, we will continue our emphasis on exceptional service, industry-leading reliability and prices below the national average."

Third quarter earnings were negatively affected by increased operations and maintenance expenses, reflecting a return to more normal spending levels compared with the same period in 2009 and an accrual to the natural disaster reserve at Alabama Power.  Earnings were further negatively affected by higher depreciation and amortization -- including reduced amortization of the cost of removal obligations at Georgia Power that helped offset the need for a rate request in 2009 -- and an increase in the number of Southern Company outstanding shares.

In the third quarter, kilowatt-hour sales to retail customers in Southern Company's four-state service area increased 9.4 percent compared with sales in the third quarter of 2009. Residential electricity sales increased 14.0 percent, while commercial sales increased 6.4 percent and industrial sales increased 7.3 percent. Year-to-date, kilowatt-hour sales to retail customers increased 8.7 percent compared with sales during the same period in 2009. Residential electricity sales increased 13.6 percent, while commercial sales increased 3.9 percent and industrial sales increased 9.0 percent.

Total energy sales to Southern Company's customers in the Southeast, including wholesale sales, increased 6.5 percent in the third quarter of 2010 compared with the same period in 2009. Year-to-date, total sales of electricity increased 6.9 percent compared with the same period in 2009.

Southern Company's financial analysts call will begin at 1 p.m. Eastern time today, at which time Ratcliffe, President Thomas A. Fanning and Chief Financial Officer Art P. Beattie will discuss earnings and earnings guidance, as well as 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 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 42,000 megawatts of generating capacity, Atlanta-based Southern Company (NYSE: SO) is the premier energy company serving the Southeast. A leading U.S. producer of 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 retail electric prices that are below the national average. Southern Company is consistently listed among the top U.S. electric service providers in customer satisfaction by the American Customer Satisfaction Index (ACSI). 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 economic recovery. 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, 2009, and subsequent securities filings, could cause results to differ materially from management expectations as suggested by such forward-looking information: the impact of recent and future federal and state regulatory change, 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 quality, 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 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), and the effects of energy conservation measures; available sources and costs of fuels; effects of inflation; ability to control costs and avoid cost overruns during the development and construction of facilities; investment performance of Southern Company's employee benefit plans and nuclear decommissioning trusts; 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 potential Plant Vogtle expansion, including Georgia Public Service Commission and Nuclear Regulatory Commission approvals and potential U.S. Department of Energy loan guarantees; regulatory approvals and actions related to the Kemper IGCC, including Mississippi Public Service Commission approvals and potential U.S. Department of Energy loan guarantees; 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 Southern Company's business resulting from terrorist incidents and the threat of terrorist incidents; interest rate fluctuations and financial market conditions and the results of financing efforts, including Southern Company's and its subsidiaries' credit ratings; 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 Southern Company'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 and its subsidiaries expressly disclaim 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

2010

2009

2010

2009

Consolidated Earnings–As Reported

(See Notes)

Traditional Operating Companies

$

756

$

726

$

1,713

$

1,449

Southern Power

62

67

106

126

Total

818

793

1,819

1,575

Parent Company and Other

(1)

(3)

3

(181)

Net Income–As Reported

$

817

$

790

$

1,822

$

1,394

Basic Earnings Per Share -

$

0.98

$

0.99

$

2.20

$

1.77

Average Shares Outstanding (in millions)

836

798

829

790

End of Period Shares Outstanding (in millions)

839

801

Three Months Ended September

Year-to-Date September

2010

2009

2010

2009

Consolidated Earnings–Excluding Items

(See Notes)

Net Income–As Reported

$

817

$

790

$

1,822

$

1,394

MC Asset Recovery Litigation Settlement

-

-

-

202

Net Income–Excluding Items

$

817

$

790

$

1,822

$

1,596

Basic Earnings Per Share–Excluding Items

$

0.98

$

0.99

$

2.20

$

2.02

Notes

- For the three months and nine months ended September 30, 2010 and 2009, dilution does not change basic earnings per share by more than 1 cent and is not material.

- The charge related to Southern Company's MC Asset Recovery litigation settlement significantly impacted the presentation of earnings and earnings per share for the nine months ended September 30, 2009, and significant charges related to the Mirant spin-off are not expected to occur in the future.

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

- Information contained in this report is subject to audit and adjustments.  Certain classifications 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

2010

2009

Change

2010

2009

Change

Consolidated Earnings Per Share–

As Reported (See Notes)

$

0.98

$

0.99

$

(0.01)

$

2.20

$

1.77

$

0.43

Significant Factors:

Traditional Operating Companies

0.04

0.34

Southern Power

(0.01)

(0.03)

Parent Company and Other

-

0.23

Additional Shares

(0.04)

(0.11)

Total–As Reported

$

(0.01)

$

0.43

Three Months Ended September

Year-to-Date September

2010

2009

Change

2010

2009

Change

Consolidated Earnings Per Share–

Excluding Items (See Notes)

$

0.98

$

0.99

$

(0.01)

$

2.20

$

2.02

$

0.18

Total–As Reported

(0.01)

0.43

MC Asset Recovery Litigation Settlement

-

(0.25)

Total–Excluding Items

$

(0.01)

$

0.18

Notes

- For the three months and nine months ended September 30, 2010 and 2009, dilution does not change basic earnings per share by more than 1 cent and is not material.

- The charge related to Southern Company's MC Asset Recovery litigation settlement significantly impacted the presentation of earnings and earnings per share for the nine months ended September 30, 2009, and significant charges related to the Mirant spin-off are not expected to occur in the future.

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

- Information contained in this report is subject to audit and adjustments.  Certain classifications may be different from final results published in the Form 10-Q.

Southern Company

EPS Earnings Analysis

Three Months Ended September 2010

Cents

Description

0.02

Retail Sales

0.11

Retail Revenue Impacts

0.15

Weather

(0.01)

Non-Fuel Revenues

(0.15)

Non-Fuel O&M

(0.07)

Depreciation & Amortization

(0.01)

Taxes Other Than Income Taxes

$0.04

Total Traditional Operating Companies

(0.01)

Southern Power

0.00

Parent and Other

(0.04)

Increase in Shares

($0.01)

Total Change in QTD EPS

Notes

-

Information contained in this report is subject to audit and adjustments.  Certain

classifications 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

2010

2009

Change

2010

2009

Change

Income Account-

Retail Revenues-

  Fuel

$

1,765

$

1,539

$

226

$

4,646

$

4,097

$

549

  Non-Fuel

2,808

2,458

350

6,957

6,258

699

Wholesale Revenues

566

519

47

1,581

1,408

173

Other Electric Revenues

161

141

20

439

392

47

Non-regulated Operating Revenues

20

25

(5)

62

78

(16)

Total Revenues

5,320

4,682

638

13,685

12,233

1,452

Fuel and Purchased Power

2,179

1,901

278

5,708

4,997

711

Non-fuel O & M

1,020

821

199

2,847

2,523

324

MCAR Litigation Settlement

0

0

0

0

202

(202)

Depreciation and Amortization

427

332

95

1,137

1,099

38

Taxes Other Than Income Taxes

235

213

22

661

621

40

Total Operating Expenses

3,861

3,267

594

10,353

9,442

911

Operating Income

1,459

1,415

44

3,332

2,791

541

Other Income, net

42

54

(12)

130

166

(36)

Interest Charges

225

226

(1)

666

685

(19)

Income Taxes

442

436

6

925

829

96

Net Income

834

807

27

1,871

1,443

428

Dividends on Preferred and Preference Stock of Subsidiaries

17

17

0

49

49

0

NET INCOME AFTER DIVIDENDS ON PREFERRED

$

817

$

790

$

27

$

1,822

$

1,394

$

428

  AND PREFERENCE STOCK (See Notes)

Notes

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

- Information contained in this report is subject to audit and adjustments.  Certain classifications 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)

2010

2009

Change

Change

2010

2009

Change

Change

Kilowatt-Hour Sales-

Total Sales

 56,783

 53,314

6.5%

 153,068

 143,172

6.9%

Total Retail Sales-

 47,545

 43,474

9.4%

1.4%

 126,992

 116,797

8.7%

2.5%

  Residential

 17,922

 15,727

14.0%

0.1%

   45,762

   40,289

13.6%

0.9%

  Commercial

 15,941

 14,979

6.4%

-0.8%

   42,684

   41,068

3.9%

-0.7%

  Industrial

 13,446

 12,529

7.3%

5.7%

   37,836

   34,722

9.0%

8.2%

  Other

      236

      239

-1.0%

-1.7%

        710

        718

-1.1%

-1.6%

Total Wholesale Sales

   9,238

   9,840

-6.1%

N/A

   26,076

   26,375

-1.1%

N/A

Notes

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

- Information contained in this report is subject to audit and adjustments.  Certain classifications 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

2010

2009

% Change

2010

2009

% Change

Consolidated –

Operating Revenues

$

5,320

$

4,682

13.6%

$

13,685

$

12,233

11.9%

Earnings Before Income Taxes

1,275

1,242

2.7%

2,796

2,272

23.1%

Net Income Available to Common

817

790

3.5%

1,822

1,394

30.7%

Alabama Power –

Operating Revenues

$

1,706

$

1,592

7.1%

$

4,663

$

4,298

8.5%

Earnings Before Income Taxes

427

426

0.4%

1,081

958

12.8%

Net Income Available to Common

260

262

-0.8%

652

584

11.6%

Georgia Power –

Operating Revenues

$

2,628

$

2,327

12.9%

$

6,612

$

5,967

10.8%

Earnings Before Income Taxes

648

608

6.6%

1,342

1,091

23.0%

Net Income Available to Common

420

388

8.3%

896

700

28.1%

Gulf Power –

Operating Revenues

$

483

$

378

28.0%

$

1,243

$

1,003

24.0%

Earnings Before Income Taxes

70

65

8.2%

165

140

18.1%

Net Income Available to Common

43

41

4.1%

101

90

11.7%

Mississippi Power –

Operating Revenues

$

327

$

331

-1.1%

$

888

$

886

0.2%

Earnings Before Income Taxes

53

58

-8.2%

103

122

-15.8%

Net Income Available to Common

34

35

-3.7%

64

75

-14.4%

Southern Power –

Operating Revenues

$

357

$

283

25.9%

$

862

$

745

15.6%

Earnings Before Income Taxes

93

108

-14.2%

157

205

-23.6%

Net Income Available to Common

62

67

-8.3%

106

126

-15.9%

Notes

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

- Information contained in this report is subject to audit and adjustments.  Certain classifications may be different from final results published in the Form 10-Q.

SOURCE Southern Company



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