Southern Company reports second-quarter 2017 results

ATLANTA, Aug. 2, 2017 /PRNewswire/ -- Southern Company today reported a second quarter 2017 loss of $1.38 billion, or $1.38 per share, compared with earnings of $623 million, or 67 cents per share, in the second quarter of 2016.  For the six months ended June 30, 2017, Southern Company reported a loss of $723 million, or 73 cents per share, compared with earnings of $1.11 billion, or $1.20 per share, for the same period in 2016.

Southern Company (PRNewsFoto/Southern Company)

Excluding the items described in the "Net Income – Excluding Items" table below, Southern Company earned $728 million, or 73 cents per share, during the second quarter of 2017, compared with $704 million, or 75 cents per share, during the second quarter of 2016.  For the six months ended June 30, 2017, excluding these items, Southern Company earned $1.38 billion, or $1.39 per share, compared with earnings of $1.24 billion, or $1.34 per share, for the same period in 2016.

Non-GAAP Financial Measures

Three Months Ended June


Year-to-Date June

Net Income - Excluding Items (in millions)

2017

2016


2017

2016

Net Income (Loss) - As Reported

$(1,381)

$623


$(723)

$1,112

Estimated Loss on Kemper IGCC

3,012

81


3,120

134

  Tax Impact

(896)

(31)


(937)

(51)

Loss on Plant Scherer Unit 3

-

-


33

-

  Tax Impact

-

-


(13)

-

Acquisition and Integration Costs

9

44


13

65

       Tax Impact

(4)

(13)


(5)

(20)

Wholesale Gas Services

28

-


(86)

-

       Tax Impact

(11)

-


35

-

Earnings Guidance Comparability Item:






Equity Return Related to Kemper IGCC

    Schedule Extension

(24)

-


(47)

-

       Tax Impact

(5)

-


(9)

-

Net Income – Excluding Items

$728

$704


$1,381

$1,240

       Average Shares Outstanding – (in millions)                                 

998

934


996

925

Basic Earnings Per Share – Excluding Items

$0.73

$0.75


$1.39

$1.34

NOTE: For more information regarding these non-GAAP adjustments, see the footnotes accompanying the Financial Highlights page of the earnings package.

Earnings drivers year-over-year for the second quarter 2017 were positively influenced by Southern Company Gas, which was acquired on July 1, 2016 and retail revenue effects at Southern Company's traditional electric operating companies.  Earnings were negatively influenced by mild weather, increased interest expense and share issuances.

"Our premier state-regulated electric and gas operating companies performed well during the second quarter," said Chairman, President and CEO Thomas A. Fanning. "This consistency in our core operations has been a hallmark of the Southern Company system and reflects our long-standing commitment to keep customers at the center of all we do as we continue to deliver safe, clean, reliable and affordable energy to the constituents we are privileged to serve."

Second quarter 2017 operating revenues were $5.43 billion, compared with $4.46 billion for the second quarter of 2016, an increase of 21.8 percent. Southern Company Gas accounted for $716 million of the increase in operating revenues for the second quarter of 2017.   For the six months ended June 30, 2017, operating revenues were $11.20 billion, compared with $8.45 billion, an increase of 32.6 percent.  Southern Company Gas accounted for $2.28 billion of the increase in operating revenues for the six months ended June 30, 2017.

Southern Company's second quarter earnings slides with supplemental financial information are available at http://investor.southerncompany.com.

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 on the site for 12 months.

About Southern Company

Southern Company (NYSE: SO) is America's premier energy company, with 46,000 megawatts of generating capacity and 1,500 billion cubic feet of combined natural gas consumption and throughput volume serving 9 million customers through its subsidiaries. The company provides clean, safe, reliable and affordable energy through electric operating companies in four states, natural gas distribution companies in seven states, a competitive generation company serving wholesale customers across America and a nationally recognized provider of customized energy solutions, 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 carbon-free 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, recognized among the Top 50 Companies for Diversity by DiversityInc, listed by Black Enterprise magazine as one of the 40 Best Companies for Diversity and designated a Top Employer for Hispanics by Hispanic Network. The company has earned a 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 energy companies 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

Net Income (Loss)–As Reported (See Notes)


2017


2016

2017


2016









Traditional Electric Operating Companies


$

(1,442)



$

599


$

(1,010)



$

1,064


Southern Power


82



89


151



139


Southern Company Gas1


49




288




Total


(1,311)



688


(571)



1,203


Parent Company and Other


(70)



(65)


(152)



(91)


Net Income (Loss)–As Reported


$

(1,381)



$

623


$

(723)



$

1,112










Basic Earnings (Loss) Per Share2


$

(1.38)



$

0.67


$

(0.73)



$

1.20










Average Shares Outstanding (in millions)


998



934


996



925


End of Period Shares Outstanding (in millions)





999



942










Non-GAAP Financial Measures


Three Months Ended
June

Year-to-Date
June

Net Income–Excluding Items (See Notes)


2017


2016

2017


2016









 Net Income (Loss)–As Reported


$

(1,381)



$

623


$

(723)



$

1,112


Estimated Loss on Kemper IGCC3


3,012



81


3,120



134


Tax Impact


(896)



(31)


(937)



(51)


Loss on Plant Scherer Unit 34





33




Tax Impact





(13)




Acquisition and Integration Costs5


9



44


13



65


Tax Impact


(4)



(13)


(5)



(20)


Wholesale Gas Services6


28




(86)




Tax Impact


(11)




35




Earnings Guidance Comparability Item:








Equity Return Related to Kemper IGCC

   Schedule Extension7


(24)




(47)




Tax Impact


(5)




(9)




  Net Income–Excluding Items


$

728



$

704


$

1,381



$

1,240










  Basic Earnings Per Share–Excluding Items


$

0.73



$

0.75


$

1.39



$

1.34










- See Notes on the following page.




 

 

Southern Company

Financial Highlights










Notes


















- In connection with the adoption in the fourth quarter 2016 of a new accounting standard for stock compensation, previously reported amounts for income tax expense were reduced by a total of $11.3 million and $15.8 million for the three and six months ended June 30, 2016, respectively.










- For comparative purposes, Net Income - Excluding Items and Basic Earnings Per Share - Excluding Items in prior year periods do not reflect any adjustments to exclude acquisition debt financing costs ($0.03 per share for the three and six months ended June 30, 2016) related to the acquisition of Southern Company Gas. This item was not contemplated in Southern Company's February 2016 guidance and was excluded in the previously reported periods through December 31, 2016.










(1) On July 1, 2016, Southern Company completed the acquisition of Southern Company Gas.










(2) For the three and six months ended June 30, 2017 and 2016, dilution does not change basic earnings per share by more than 1 cent and is not material.


(3) Earnings for the three and six months ended June 30, 2017 and 2016 include the estimated losses relating to Mississippi Power Company's integrated coal gasification combined cycle facility construction project in Kemper County, Mississippi (Kemper IGCC) which significantly impacted the presentation of earnings and earnings per share. Further charges of uncertain amounts may occur in future periods in connection with the resolution of the Mississippi Public Service Commission's Kemper Settlement Docket.










(4) Earnings for the six months ended June 30, 2017 include a $32.5 million write-down ($20 million after tax) of Gulf Power Company's ownership of Plant Scherer Unit 3 as a result of the retail rate case settlement approved by the Florida Public Service Commission on April 4, 2017. Further charges are not expected to occur.










(5) Earnings for the three and six months ended June 30, 2017 and 2016 include costs related to the acquisition and integration of Southern Company Gas. Further costs are expected to continue to occur in connection with the related integration activities; however, the amount and duration of such expenditures is uncertain.










(6) Earnings for the three and six months ended June 30, 2017 include the Wholesale Gas Services business of Southern Company Gas. Presenting earnings and earnings per share excluding Wholesale Gas Services provides investors with an additional measure of operating performance that excludes the volatility resulting from mark-to-market and lower of weighted average cost or current market price accounting adjustments.










(7) Earnings for the three and six months ended June 30, 2017 include additional allowance for funds used during construction (AFUDC) equity as a result of extending the schedule for the Kemper IGCC construction project. AFUDC equity ceased as of the project's suspension in June 2017. Southern Company's 2017 earnings guidance, initially presented in October 2016 assumed construction would be complete and AFUDC equity would cease by November 30, 2016. As a result, Southern Company believes presentation of earnings per share excluding these amounts provides investors with information comparable to the 2017 guidance. Management also uses such measures to evaluate Southern Company's performance in 2017.

 

 

Southern Company

Significant Factors Impacting EPS
















Three Months Ended
June


Year-to-Date
June



2017


2016


Change


2017


2016


Change

Earnings (Loss) Per Share–













As Reported1 (See Notes)


$

(1.38)



$

0.67



$

(2.05)



$

(0.73)



$

1.20



$

(1.93)















 Significant Factors:













 Traditional Electric Operating Companies






$

(2.18)







$

(2.24)


Southern Power






(0.01)







0.01


Southern Company Gas2






0.05







0.31


Parent Company and Other












(0.07)


Increase in Shares3






0.09







0.06


 Total–As Reported






$

(2.05)







$

(1.93)

















Three Months Ended
June


Year-to-Date
June

Non-GAAP Financial Measures


2017


2016


Change


2017


2016


Change

Earnings Per Share–













Excluding Items (See Notes)


$

0.73



$

0.75



$

(0.02)



$

1.39



$

1.34



$

0.05















  Total–As Reported






$

(2.05)







$

(1.93)


Kemper IGCC Impacts4






2.04







2.05


Loss on Plant Scherer Unit 35












0.02


Acquisition and Integration Costs6






(0.03)







(0.04)


Wholesale Gas Services7






0.02







(0.05)


  Total–Excluding Items






$

(0.02)







$

0.05















- See Notes on the following page.













 

 

Southern Company

Significant Factors Impacting EPS

Notes


























- In connection with the adoption in the fourth quarter 2016 of a new accounting standard for stock compensation, previously reported amounts for income tax expense were reduced by a total of $11.3 million and $15.8 million for the three and six months ended June 30, 2016, respectively.














- For comparative purposes, Basic Earnings Per Share - Excluding Items in prior year periods does not reflect any adjustments to exclude acquisition debt financing costs ($0.03 per share for the three and six months ended June 30, 2016) related to the acquisition of Southern Company Gas. This item was not contemplated in Southern Company's February 2016 guidance and was excluded in the previously reported periods through December 31, 2016.














(1) For the three and six months ended June 30, 2017 and 2016, dilution does not change basic earnings per share by more than 1 cent and is not material.














(2) On July 1, 2016, Southern Company completed the acquisition of Southern Company Gas.














(3) Per share changes for each of the business segments reported in this table are calculated based on average shares outstanding as of June 30, 2016. The per share change attributable to Increase in Shares reflects the impact of the increase in average shares outstanding from June 30, 2016 through June 30, 2017. Because Southern Company reported a net loss for the three and six month periods ended June 30, 2017, the dilutive impact of the increase of average shares outstanding for these periods served to reduce the net loss per share.














(4) Earnings for the three and six months ended June 30, 2017 and 2016 include the estimated losses relating to Mississippi Power Company's integrated coal gasification combined cycle facility construction project in Kemper County, Mississippi (Kemper IGCC) which significantly impacted the presentation of earnings and earnings per share. Further charges of uncertain amounts may occur in future periods in connection with the resolution of the Mississippi Public Service Commission's Kemper Settlement Docket.

 

Earnings for the three and six months ended June 30, 2017 also include additional allowance for funds used during construction (AFUDC) equity as a result of extending the schedule for the Kemper IGCC construction project. AFUDC equity ceased as of the project's suspension in June 2017. Southern Company's 2017 earnings guidance, initially presented in October 2016 assumed construction would be complete and AFUDC equity would cease by November 30, 2016. As a result, Southern Company believes presentation of earnings per share excluding these amounts provides investors with information comparable to the 2017 guidance. Management also uses such measures to evaluate Southern Company's performance in 2017.














(5) Earnings for the six months ended June 30, 2017 include a $32.5 million write-down ($20 million after tax) of Gulf Power Company's ownership of Plant Scherer Unit 3 as a result of the retail rate case settlement approved by the Florida Public Service Commission on April 4, 2017. Further charges are not expected to occur.














(6) Earnings for the three and six months ended June 30, 2017 and 2016 include costs related to the acquisition and integration of Southern Company Gas. Further costs are expected to continue to occur in connection with the related integration activities; however, the amount and duration of such expenditures is uncertain.














(7) Earnings for the three and six months ended June 30, 2017 include the Wholesale Gas Services business of Southern Company Gas. Presenting earnings and earnings per share excluding Wholesale Gas Services provides investors with an additional measure of operating performance that excludes volatility resulting from mark-to-market and lower of weighted average cost or current market price accounting adjustments.

 

 

Southern Company

EPS Earnings Analysis

Three Months Ended June 2017 vs. June 2016



Dollars

Description



$(0.01)

Retail Sales



0.05

Retail Revenue Impacts



(0.03)

Weather



(0.01)

Wholesale Operations



0.01

Non-Fuel O&M



(0.01)

Other Income and Deductions



(0.01)

Interest Expense



0.01

Income Taxes



$—

Total Traditional Electric Operating Companies



(0.01)

Southern Power



0.07

Southern Company Gas1



(0.03)

Parent and Other



(0.05)

Increase in Shares



$(0.02)

Total Change in EPS (Excluding Items)



(2.04)

Kemper IGCC Impacts2



0.03

Acquisition and Integration Costs3



(0.02)

Wholesale Gas Services4



$(2.05)

Total Change in EPS (As Reported)



- See Notes on the following page.

 

Southern Company

EPS Earnings Analysis

Three Months Ended June 2017 vs. June 2016

Notes


- In connection with the adoption in the fourth quarter 2016 of a new accounting standard for stock compensation, previously reported amounts for income tax expense were reduced by a total of $11.3 million for the three months ended June 30, 2016.


- For comparative purposes, Basic Earnings Per Share - Excluding Items in the prior year period does not reflect any adjustments to exclude acquisition debt financing costs ($0.03 per share for the three months ended June 30, 2016) related to the acquisition of Southern Company Gas. This item was not contemplated in Southern Company's February 2016 guidance and was excluded in the previously reported periods through December 31, 2016.


(1) On July 1, 2016, Southern Company completed the acquisition of Southern Company Gas.


(2) Earnings for the three months ended June 30, 2017 and 2016 include the estimated losses relating to Mississippi Power Company's integrated coal gasification combined cycle facility construction project in Kemper County, Mississippi (Kemper IGCC) which significantly impacted the presentation of earnings and earnings per share. Further charges of uncertain amounts may occur in future periods in connection with the resolution of the Mississippi Public Service Commission's Kemper Settlement Docket.

 

Earnings for the three months ended June 30, 2017 also include additional allowance for funds used during construction (AFUDC) equity as a result of extending the schedule for the Kemper IGCC construction project. AFUDC equity ceased as of the project's suspension in June 2017. Southern Company's 2017 earnings guidance, initially presented in October 2016 assumed construction would be complete and AFUDC equity would cease by November 30, 2016. As a result, Southern Company believes presentation of earnings per share excluding these amounts provides investors with information comparable to the 2017 guidance. Management also uses such measures to evaluate Southern Company's performance in 2017.


(3) Earnings for the three months ended June 30, 2017 and 2016 include costs related to the acquisition and integration of Southern Company Gas. Further costs are expected to continue to occur in connection with the related integration activities; however, the amount and duration of such expenditures is uncertain.



(4) Earnings for the three months ended June 30, 2017 include the Wholesale Gas Services business of Southern Company Gas in future periods. Presenting earnings and earnings per share excluding Wholesale Gas Services provides investors with an additional measure of operating performance that excludes the volatility resulting from mark-to-market and lower of weighted average cost or current market price accounting adjustments.

 

 

Southern Company

Consolidated Earnings As Reported

(In Millions of Dollars)
















Three Months Ended June


Year-to-Date June



2017


2016


Change


2017


2016


Change

Income Account-













Retail Electric Revenues-













Fuel


$

1,016



$

998



$

18



$

1,944



$

1,873



$

71


Non-Fuel


2,761



2,750



11



5,227



5,251



(24)


Wholesale Electric Revenues


618



446



172



1,149



842



307


Other Electric Revenues


167



166



1



342



348



(6)


Natural Gas Revenues


684





684



2,214





2,214


Other Revenues


184



99



85



326



137



189


Total Revenues


5,430



4,459



971



11,202



8,451



2,751


Fuel and Purchased Power


1,303



1,212



91



2,478



2,288



190


Cost of Natural Gas


232





232



951





951


Cost of Other Sales


114



58



56



203



77



126


Non-Fuel O & M


1,301



1,099



202



2,631



2,206



425


Depreciation and Amortization


754



569



185



1,469



1,110



359


Taxes Other Than Income Taxes


308



255



53



638



511



127


Estimated Loss on Kemper IGCC


3,012



81



2,931



3,120



134



2,986


Total Operating Expenses


7,024



3,274



3,750



11,490



6,326



5,164


Operating Income


(1,594)



1,185



(2,779)



(288)



2,125



(2,413)


Allowance for Equity Funds Used During Construction


58



45



13



115



98



17


Earnings from Equity Method Investments


28



(1)



29



67



(1)



68


Interest Expense, Net of Amounts Capitalized


424



293



131



840



539



301


Other Income (Expense), net


(3)



(28)



25



(11)



(56)



45


Income Taxes


(587)



261



(848)



(273)



479



(752)


Net Income (Loss)


(1,348)



647



(1,995)



(684)



1,148



(1,832)


Less:













Dividends on Preferred and Preference Stock of Subsidiaries


11



12



(1)



22



23



(1)


Net Income (Loss) Attributable to Noncontrolling Interests


22



12



10



17



13



4


NET INCOME (LOSS) ATTRIBUTABLE TO SOUTHERN COMPANY


$

(1,381)



$

623



$

(2,004)



$

(723)



$

1,112



$

(1,835)















Notes


























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














- In connection with the adoption in the fourth quarter 2016 of a new accounting standard for stock compensation, previously reported amounts for income tax expense were reduced by a total of $11.3 million and $15.8 million for the three and six months ended June 30, 2016, respectively.

 

 

Southern Company

Kilowatt-Hour Sales and Customers



































(In Millions of KWHs)




















Three Months Ended June


Year-to-Date June



2017


2016


Change


Weather Adjusted Change


2017


2016


Change


Weather Adjusted Change

Kilowatt-Hour Sales-

















Total Sales


50,665



47,572



6.5

%




96,358



93,048



3.6

%




















Total Retail Sales-


38,849



39,426



(1.5)

%


(0.4)

%


74,353



77,465



(4.0)

%


(0.8)

%

Residential


12,087



12,443



(2.9)

%


(0.4)

%


23,003



25,045



(8.2)

%


0.2

%

Commercial


13,271



13,381



(0.8)

%


%


25,038



25,704



(2.6)

%


(0.9)

%

Industrial


13,280



13,382



(0.8)

%


(0.8)

%


25,886



26,270



(1.5)

%


(1.5)

%

Other


211



220



(4.2)

%


(4.0)

%


426



446



(4.6)

%


(4.4)

%


















Total Wholesale Sales


11,816



8,146



45.1

%


N/A


22,005



15,583



41.2

%


N/A



































(In Thousands of Customers)
























Period Ended June






























2017


20161


Change



Regulated Utility Customers-













Total Utility Customers-






9,194



9,119



0.8

%



Total Traditional Electric






4,621



4,575



1.0

%



Southern Company Gas






4,573



4,544



0.6

%







































































Notes


































(1) Southern Company's acquisition of Southern Company Gas was completed on July 1, 2016. June 2016 customers are shown on a pro forma basis for comparative purposes.

 

 

Southern Company

Financial Overview As Reported

(In Millions of Dollars)
















Three Months Ended June


Year-to-Date June



2017


2016


% Change


2017


2016


% Change

Southern Company –













Operating Revenues


$

5,430



$

4,459



21.8

%


$

11,202



$

8,451



32.6

%

Earnings (Loss) Before Income Taxes


(1,935)



908



N/M


(957)



1,627



N/M

Net Income (Loss) Available to Common


(1,381)



623



N/M


(723)



1,112



N/M














Alabama Power –













Operating Revenues


$

1,484



$

1,444



2.8

%


$

2,866



$

2,776



3.2

%

Earnings Before Income Taxes


386



358



7.8

%


689



621



11.0

%

Net Income Available to Common


230



213



8.0

%


403



370



8.9

%














Georgia Power –













Operating Revenues


$

2,048



$

2,051



(0.1)

%


$

3,880



$

3,923



(1.1)

%

Earnings Before Income Taxes


551



565



(2.5)

%


971



998



(2.7)

%

Net Income Available to Common


347



349



(0.6)

%


607



618



(1.8)

%














Gulf Power –













Operating Revenues


$

357



$

365



(2.2)

%


$

707



$

700



1.0

%

Earnings Before Income Taxes


61



61



%


95



112



(15.2)

%

Net Income Available to Common


35



34



2.9

%


53



63



(15.9)

%














Mississippi Power –













Operating Revenues


$

303



$

277



9.4

%


$

575



$

533



7.9

%

Earnings (Loss) Before Income Taxes


(2,934)



(14)



N/M


(2,981)



(13)



N/M

Net Income (Loss) Available to Common


(2,054)



2



N/M


(2,074)



13



N/M














Southern Power –













Operating Revenues


$

529



$

373



41.8

%


$

979



$

688



42.3

%

Earnings Before Income Taxes


66



60



10.0

%


78



87



(10.3)

%

Net Income Available to Common


82



89



(7.9)

%


151



139



8.6

%














Southern Company Gas1













Operating Revenues


$

716



$



N/A


$

2,276



$



N/A

Earnings Before Income Taxes


80





N/A


468





N/A

Net Income Available to Common


49





N/A


288





N/A














N/M - not meaningful













N/A - not applicable


























Notes


























- In connection with the adoption in the fourth quarter 2016 of a new accounting standard for stock compensation, previously reported amounts for income tax expense were reduced by a total of $11.3 million and $15.8 million for the three and six months ended June 30, 2016, respectively.














(1) On July 1, 2016, Southern Company completed the acquisition of Southern Company Gas.

 

 

SOURCE Southern Company

For further information: Southern Company Media Relations, 404-506-5333 or 1-866-506-5333, or Investor Relations: Aaron Abramovitz, 404-506-0780, apabramo@southernco.com

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