Southern Company Third Quarter Positive Despite Economic Challenges, Mild Weather
ATLANTA, Oct. 23 /PRNewswire-FirstCall/ — Southern Company reported third quarter earnings of $780.4 million, or $1.01 a share. The earnings compared with $762.0 million, or $1.00 a share, in the third quarter of 2007.
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Earnings for the first nine months of 2008 were $1.56 billion, or $2.02 a share, compared with $1.53 billion, or $2.03 a share, for the same period a year ago.
Earnings for the nine months ended Sept. 30, 2008, included a $67 million charge, or 9 cents per share, related to three leveraged leases from the 1990s when Southern Company pursued development of international energy projects. Earnings for the third quarter and nine months ended Sept. 30, 2007, included synthetic fuel earnings of 1 cent per share and 7 cents per share, respectively.
Excluding the impact of synthetic fuel investments, Southern Company earned $1.01 a share for the third quarter of 2008, compared with 99 cents a share for the same period in 2007. Excluding the impact of synthetic fuel investments and charges related to the leveraged leases, earnings for the first nine months of 2008 were $2.11 a share, compared with $1.96 a share for the same period in 2007.
Revenues for the third quarter were $5.43 billion compared with $4.83 billion in the third quarter of 2007, a 12.3 percent increase. For the first nine months of the year, revenues totaled $13.32 billion, compared with $12.01 billion in the same period a year ago, an increase of 10.9 percent.
Chairman, President and CEO David M. Ratcliffe said that despite the challenges of mild weather, a sluggish economy and turmoil in the financial markets, Southern Company’s businesses continued to perform well overall in the third quarter, giving the company positive results and keeping the company on track to deliver on its financial and operational goals for the year.
“We remain committed to the strategy that has provided our customers with reliable energy and outstanding service at prices below the national average and that has rewarded investors, even in challenging times,” Ratcliffe said.
The economy in the Southeast continues to experience the same stress as other regions of the country, but to a lesser degree. While customer growth has slowed, it is still positive. Southern Company is serving more than 28,000 additional customers, compared with the same time last year. This growth partially offset a decrease in usage.
Positive third quarter earnings drivers include increased retail rates and revenues from market-response rates offered to commercial and industrial customers. These positive drivers were primarily offset by mild summer temperatures as compared to the same period in 2007, and asset depreciation primarily associated with increased investment in environmental equipment and transmission and distribution equipment. These investments are needed to produce cleaner energy and maintain reliability.
In the third quarter, kilowatt-hour sales to retail customers in Southern Company’s four-state service area decreased 4.6 percent compared with sales during the 2007 third quarter. Residential electricity sales decreased 7.6 percent. Commercial sales decreased 2.3 percent and industrial sales declined 3.4 percent. Total sales of electricity to Southern Company’s customers in the Southeast, including wholesale sales, are down 2.5 percent compared with the third quarter last year. The major contributor to the decrease in third quarter sales was the milder weather as compared to the same period last year.
For the first nine months of 2008, kilowatt-hour sales to Southern Company’s retail customers decreased 1.7 percent compared with sales during the same period in 2007. Residential electricity sales decreased 3.4 percent, commercial sales are unchanged and industrial sales declined 1.6 percent as compared with the first nine months of 2007. Total sales of electricity to Southern Company’s customers in the Southeast, including wholesale sales, are down 0.4 percent compared with the first nine months of last year.
With 4.4 million customers and more than 42,000 megawatts of generating capacity, Atlanta-based Southern Company 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 significantly below the national average. Southern Company has been listed the top ranking U.S. electric service provider in customer satisfaction for nine consecutive years by the American Customer Satisfaction Index (ACSI). Visit our Web site at http://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 results of operations. 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, 2007, 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 and emissions of sulfur, nitrogen, mercury, carbon, soot, or particulate matter and other substances, 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 EPA civil actions against certain Southern Company subsidiaries, FERC matters, IRS audits, and Mirant matters; 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, 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; investment performance of Southern Company’s employee benefit plans; 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 storm restoration cost recovery; regulatory approvals related to the potential Plant Vogtle expansion, including Georgia PSC and NRC approvals; 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 neighboring utilities; 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 an avian influenza, or other similar occurrences; the direct or indirect effects on Southern Company’s business resulting from incidents similar to the August 2003 power outage in the Northeast; 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) 3 Months Ended Year-to-Date September September 2008 2007 2008 2007 Consolidated Earnings-As Reported (Notes) (Notes) (Notes) (Notes) (See Notes) Traditional Operating Companies $727 $714 $1,520 $1,382 Southern Power 59 52 124 123 Total 786 766 1,644 1,505 Synthetic Fuels – 15 (1) 55 Parent Company and Other (6) (19) (87) (30) Net Income – As Reported $780 $762 $1,556 $1,530 Basic Earnings Per Share – (See Notes) $1.01 $1.00 $2.02 $2.03 Average Shares Outstanding (in millions) 773 758 769 755 End of Period Shares Outstanding (in millions) 775 760 3 Months Ended Year-to-Date September September 2008 2007 2008 2007 Consolidated Earnings-Excluding Items (See Notes) Net Income – As Reported $780 $762 $1,556 $1,530 Leveraged Lease Adjustment – – 67 – Synthetic Fuels – (15) 1 (55) Net Income-Excluding Items $780 $747 $1,624 $1,475 Basic Earnings Per Share-Excluding Items $1.01 $0.99 $2.11 $1.96 Significant Factors Impacting EPS 3 Months Ended September Year-to-Date September 2008 2007 Change 2008 2007 Change Consolidated Earnings-As Reported $1.01 $1.00 $0.01 $$2.02 $2.03 $(0.01) (See Notes) Significant Factors: Traditional Operating Companies 0.02 0.18 Southern Power 0.01 0.00 Synthetic Fuels (0.01) (0.07) Parent Company and Other 0.01 (0.08) Additional Shares (0.02) (0.04) Total-As Reported $0.01 $(0.01) 3 Months Ended September Year-to-Date September 2008 2007 Change 2008 2007 Change Consolidated Earnings-Excluding Items $1.01 $0.99 $0.02 $2.11 $1.96 $0.15 (See Notes) Total-As Reported 0.01 (0.01) Leveraged Lease Adjustment 0.00 0.09 Synthetic Fuels 0.01 0.07 Total-Excluding Items $0.02 $0.15 Notes – For the three months and nine months ended September 30, 2008 and 2007, diluted earnings per share are not more than 1 cent per share and are not material. – The charge related to Southern Company’s investments in leveraged lease transactions significantly impacted the presentation of earnings and earnings per share for the nine months ended September 30, 2008, and significant charges related to these investments are not expected to occur on a regular basis. – Tax credits associated with Southern Company’s synthetic fuel investments expired December 31, 2007. Synthetic fuel related income no longer materially contributes to Southern Company’s earnings or earnings per share. – 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 2008 Cents Description $0.14 Non-Fuel Revenues (0.07) Weather Impact on Non-Fuel Revenues (0.04) Depreciation & Amortization (0.01) Taxes Other Than Income Taxes $0.02 Total Traditional Operating Companies 0.01 Southern Power 0.01 Parent and Other (0.02) Increase in Shares $0.02 Total Change in QTD EPS (x-Items) (0.01) Synthetic Fuels $0.01 Total Change in QTD EPS (As Reported) Notes – Tax credits associated with Southern Company’s synthetic fuel investments expired December 31, 2007. Synthetic fuel related income no longer materially contributes to Southern Company’s earnings or earnings per share. – 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) 3 Months Ended September Year-to-Date September 2008 2007 Change 2008 2007 Change Income Account- Retail Revenue- Fuel $1,911 $1,600 $311 $4,506 $3,932 $574 Non-Fuel 2,567 2,486 81 6,428 6,003 425 Wholesale Revenues 775 563 212 1,880 1,531 349 Other Electric Revenues 142 131 11 414 381 33 Non-regulated Operating Revenues 31 52 (21) 97 166 (69) Total Revenues 5,426 4,832 594 13,325 12,013 1,312 Fuel and Purchased Power 2,531 2,020 511 5,895 4,959 936 Non-fuel O & M 908 911 (3) 2,720 2,634 86 Depreciation and Amortization 367 312 55 1,070 929 141 Taxes Other Than Income Taxes 215 207 8 603 574 29 Total Operating Expenses 4,021 3,450 571 10,288 9,096 1,192 Operating Income 1,405 1,382 23 3,037 2,917 120 Other Income, net 45 68 (23) 70 123 (53) Interest Charges and Dividends 235 243 (8) 713 704 9 Income Taxes 435 445 (10) 838 806 32 NET INCOME (See Notes) $780 $762 $18 $1,556 $1,530 $26 Kilowatt-Hour Sales (In Millions of KWHs) 3 Months Ended September Weather Adjusted As Reported (See Notes) 2008 2007 Change Change Kilowatt-Hour Sales- Total Sales 57,706 59,205 -2.5% Total Retail Sales- 45,800 47,989 -4.6% -1.4% Residential 16,153 17,488 -7.6% -2.4% Commercial 15,546 15,910 -2.3% 1.1% Industrial 13,866 14,348 -3.4% -3.0% Other 235 243 -3.0% -2.4% Total Wholesale Sales 11,906 11,216 6.2% N/A Kilowatt-Hour Sales (In Millions of KWHs) Year-to-Date September Weather Adjusted As Reported (See Notes) 2008 2007 Change Change Kilowatt-Hour Sales- Total Sales 156,719 157,329 -0.4% Total Retail Sales- 124,258 126,384 -1.7% -0.4% Residential 40,983 42,412 -3.4% -0.9% Commercial 41,885 41,903 0.0% 1.3% Industrial 40,688 41,349 -1.6% -1.5% Other 702 720 -2.6% -2.4% Total Wholesale Sales 32,461 30,945 4.9% 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) 3 Months Ended September Year-to-Date September 2008 2007 %Change 2008 2007 %Change Consolidated – Operating Revenues $5,426 $4,832 12.3% $13,325 $12,013 10.9% Earnings Before Income Taxes 1,215 1,207 0.6% 2,394 2,336 2.5% Net Income 780 762 2.4% 1,556 1,530 1.7% Alabama Power – Operating Revenues $1,865 $1,635 14.1% $4,672 $4,168 12.1% Earnings Before Income Taxes 418 408 2.5% 888 853 4.1% Net Income Available to Common 252 246 2.2% 535 508 5.2% Georgia Power – Operating Revenues $2,644 $2,444 8.2% $6,620 $5,945 11.4% Earnings Before Income Taxes 644 630 2.2% 1,292 1,122 15.1% Net Income Available to Common 402 399 0.6% 826 719 14.8% Gulf Power – Operating Revenues $422 $377 12.0% $1,083 $971 11.5% Earnings Before Income Taxes 62 55 12.5% 137 121 13.2% Net Income Available to Common 37 34 9.3% 84 74 12.9% Mississippi Power – Operating Revenues $381 $333 14.5% $965 $863 11.8% Earnings Before Income Taxes 56 56 0.8% 121 131 -7.8% Net Income Available to Common 36 34 5.1% 76 80 -4.9% Southern Power – Operating Revenues $516 $348 48.3% $1,048 $784 33.6% Earnings Before Income Taxes 97 86 13.5% 203 205 -0.9% Net Income Available to Common 60 51 15.8% 124 123 0.5% 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.
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Southern Company
CONTACT: Media, Terri Cohilas, +1-404-506-5333 or +1-866-506-5333,media@southerncompany.com; or Investor Relations, Glen Kundert,+1-404-506-5135, gakunder2@southernco.com
Web site: http://www.southerncompany.com/