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Southern Company reports steady third quarter earnings
Impact of customer growth, warm weather offset by increased expenses
PRNewswire-FirstCall
NYSE: SO
ATLANTA - Oct. 25, 2007 - Southern Company reported third quarter earnings of $762.0 million, or $1.00 a share. The earnings compared with $738.0 million, or 99 cents a share, in the third quarter of 2006. (Logo: http://www.newscom.com/cgi-bin/prnh/20020207/SOCOLOGO ) Earnings for the first nine months of 2007 were $1.53 billion, or $2.03 a share, compared with $1.38 billion, or $1.86 a share, for the same period a year ago. Excluding the impact of synthetic fuel investments, third quarter earnings per share were 99 cents, compared with 99 cents in the third quarter of 2006, and earnings for the first nine months of 2007 were $1.96 a share, compared with $1.86 a share for the same period in 2006. Chairman, President and CEO David M. Ratcliffe said the company continued to achieve superior operational performance during a challenging summer season. "Operationally, we've had an extraordinary year. The hard work of our employees enabled us to meet unprecedented demand as we set five successive peak records while in the midst of an extreme drought," Ratcliffe said. "Our business units continue to perform well -- operating at historically high levels of reliability, achieving industry-leading customer satisfaction levels and continuing to offer retail prices more than 17 percent below the national average." The number of customers served by Southern Company grew 1.5 percent in the third quarter. The Southeast continues to attract new residents and experience economic growth despite a slowdown in the national economy. The unemployment rate in the Southeast is 4.2 percent, compared with the nation's 4.6 percent. Personal income growth continues to be strong in the third quarter, at 4.6 percent in the Southeast compared with the nation's 3.6 percent growth rate. The positive earnings drivers in the third quarter also include state regulatory actions and positive margins from commercial and industrial market- based rates. The drivers were offset in part by higher operations and maintenance expenses, higher interest expense, and asset depreciation primarily associated with increased investment in environmental equipment and transmission and distribution related to maintaining reliability in the growing Southeast. Total revenues for the third quarter were $4.83 billion compared with $4.55 billion in the third quarter of 2006, a 6.2 percent increase. For the first nine months of the year, revenues totaled $12.01 billion, compared with $11.20 billion in the same period a year ago, an increase of 7.2 percent. In the third quarter, kilowatt-hour sales to retail customers in Southern Company's four-state service area increased 1.2 percent compared with sales during the 2006 third quarter. Residential electricity sales increased 1.5 percent. Commercial sales increased 2.8 percent and industrial sales declined 1.0 percent. Total sales of electricity to Southern Company's customers in the Southeast, including wholesale sales, increased 1.6 percent compared with the third quarter last year. With 4.3 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, one of America's fastest-growing regions. 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 eight 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, customer and economic growth and Southern Company's strategies. 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 Dec. 31, 2006, 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 and implementation of the Energy Policy Act of 2005, environmental laws including regulation of 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-related 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; 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; the performance of projects undertaken by the non-utility businesses and the success of efforts to invest in and develop new opportunities; fluctuations in the level of oil prices; the level of production by the synthetic fuel operations at Carbontronics Synfuels Investors LP and Alabama Fuel Products LLC for the remainder of fiscal year 2007; 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; 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, 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.
2007 Business Outlook
Financial Goals
* Earnings Per Share Growth - Regular, predictable, sustainable; average
5% over the long term, with annual growth within a 4-6% range
2007 Guidance, ex-synfuel: $2.13 to $2.18 ($2.18 to $2.25, including
synfuel)
* Return on Equity - Top quartile of electric utilities
* Dividend Growth - Since 2005, annual growth of approximately 4%. Long-
term growth consistent with a targeted dividend payout ratio range of
70-75%
* Financial Integrity - Achieve an attractive risk-adjusted return,
supported by a low-risk business model, sound financial policy, and a
stable 'A' credit rating
Our Focus in 2007
Near term:
* Georgia Power retail rate case
* Capital projects, including a $4.6 billion environmental construction
program in 2007 - 2009
On-going and Long term:
* Continued industry-leading reliability and customer satisfaction, while
maintaining our low retail prices relative to the national average
* Meeting increased energy demand with the best economic and environmental
choices
* Continuing to deliver on our value proposition: superior risk-adjusted
total shareholder return
Our Major Businesses
* Our Four Traditional Operating Companies
-- Alabama Power, Georgia Power, Gulf Power, Mississippi Power
-- Over 4.3 million retail electric customers with expected annual
growth in customers of 1.7% and expected annual growth in territorial
demand of 2.0%
-- Over 35,000 MW of nameplate generation capacity
-- Over 4,300 MW of capacity under long-term wholesale contracts
* Southern Power Company
-- Over 6,700 MW of gas-fired, generation capacity
-- Near-term construction projects include new units at plants Franklin,
Oleander and Stanton
2007 Business Outlook
Financial Information
Forecast Data (in billions)
'07-'09
Sources of Cash
Net Operating Cash Flow $11.0
Common Equity 1.5
Net Debt and Preferred 4.6
Total Sources $17.1
Uses of Cash
Capital Expenditures $13.2
Common Dividends 3.9
Total Uses $17.1
Capital Expenditures '07-'09
New Generation $0.7
Fossil/Hydro Retrofits 1.0
Environmental 4.6
Nuclear Fuel & Retrofits 0.7
Transmission 1.5
Distribution 2.3
Other/General 0.6
Traditional Operating Cos $11.4
Southern Power 1.6
Other 0.2
Total $13.2
Senior Unsecured Alabama Georgia Gulf Mississippi Southern Southern
Credit Ratings* Power Power Power Power Power Company
S&P A A A A BBB+ A-
Moody's A2 A2 A2 A1 Baa1 A3
Fitch A+ A+ A AA- BBB+ A
* Note: A securities rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any
time
2006 Key Metrics (unaudited, in millions)
Total Net Return on Operating
Revenues Income Avg Equity Cash Flow
Traditional Operating Cos $13,920 $1,462 13.5% $2,549
Southern Company $14,356 $1,573 14.3% $2,820
Total Total Total Common
Assets Debt Pref Stock Equity
Traditional Operating Cos $38,825 $12,440 $744 $11,303
Southern Company $42,858 $15,861 $744 $11,371
Cautionary Statement Regarding Forward-Looking Information
The information contained in this 2007 Business Outlook is forward-looking information based on current expectations and plans that involve risks and uncertainties. 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 of 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, 2006, and subsequent securities filings, could cause actual 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 and implementation of the Energy Policy Act of 2005, environmental laws including regulation of 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-related 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; 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; the performance of projects undertaken by the non-utility businesses and the success of efforts to invest in and develop new opportunities; fluctuations in the level of oil prices; the level of production by the synthetic fuel operations at Carbontronics Synfuels Investors LP and Alabama Fuel Products LLC for the remainder of fiscal year 2007; 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; 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, 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
2007 2006 2007 2006
(Notes) (Notes) (Notes) (Notes)
Consolidated Earnings-As Reported
(See Notes)
Traditional Operating Companies $714 $691 $1,382 $1,293
Southern Power 52 46 123 98
Total 766 737 1,505 1,391
Synthetic Fuels 15 4 55 7
Leasing Business 3 5 4 16
Parent Company and Other (22) (8) (34) (29)
Net Income - As Reported $762 $738 $1,530 $1,385
Basic Earnings Per Share -
(See Notes) $1.00 $0.99 $2.03 $1.86
Operating Revenues $4,832 $4,549 $12,013 11,204
Average Shares Outstanding
(in millions) 758 743 755 743
End of Period Shares Outstanding
(in millions) 760 743
3 Months Ended Year-to-Date
September September
2007 2006 2007 2006
Consolidated Earnings-Excluding
Synfuels
(See Notes)
Net Income - As Reported $762 $738 $1,530 $1,385
Less: Synthetic Fuels (15) (4) (55) (7)
Net Income-Excluding Synthetic Fuels $747 $734 $1,475 $1,378
Basic Earnings Per Share-Excluding
Synfuels $0.99 $0.99 $1.96 $1.86
Significant Factors Impacting EPS
3 Months Ended September Year-to-Date September
2007 2006 Change 2007 2006 Change
Consolidated Earnings-
As Reported $1.00 $0.99 $0.01 $2.03 $1.86 $0.17
(See Notes)
Significant Factors:
Traditional Operating
Companies 0.03 0.12
Southern Power 0.01 0.04
Synthetic Fuels 0.01 0.07
Leasing (0.01) (0.01)
Parent Company and Other (0.01) (0.02)
Additional Shares (0.02) (0.03)
Total-As Reported $0.01 $0.17
3 Months Ended September Year-to-Date September
2007 2006 Change 2007 2006 Change
Consolidated Earnings-
Excluding Synfuels $0.99 $0.99 $0.00 $1.96 $1.86 $0.10
(See Notes)
Total-As Reported 1.00 2.03
Less: Synthetic Fuels (0.01) (0.07)
Total-Excluding
Synthetic Fuels $0.99 $1.96
Notes
- For the third quarter and year-to-date 2007, diluted earnings per share
was not more than 1 cent per share.
- Tax credits associated with Southern Company's synthetic fuel
investments expire December 31, 2007 and will not contribute to Southern
Company's earnings and earnings per share after 2007.
- 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
Analysis of Consolidated Earnings
(In Millions of Dollars)
3 Months Ended Year-to-Date
September September
2007 2006 Change 2007 2006 Change
Income Account-
Retail Revenue $4,086 $3,853 $233 $9,935 $9,295 $640
Wholesale Revenue 563 506 57 1,531 1,361 170
Other Electric Revenues 131 120 11 381 347 34
Non-regulated Operating Revenues 52 70 (18) 166 201 (35)
Total Revenues 4,832 4,549 283 12,013 11,204 809
Fuel and Purchased Power 2,020 1,865 155 4,959 4,464 495
Non-fuel O & M 911 840 71 2,634 2,547 87
Depreciation and Amortization 312 300 12 929 897 32
Taxes Other Than Income Taxes 207 186 21 574 541 33
Total Operating Expenses 3,450 3,191 259 9,096 8,449 647
Operating Income 1,382 1,358 24 2,917 2,755 162
Other Income, net 56 10 46 111 24 87
Interest Charges and Dividends 243 225 18 704 660 44
Income Taxes 433 405 28 794 734 60
NET INCOME (See Notes) $762 $738 $24 $1,530 $1,385 $145
Kilowatt-Hour Sales
(In Millions of KWHs)
3 Months Ended Year-to-Date
September September
As Reported (See Notes) 2007 2006 Change 2007 2006 Change
Kilowatt-Hour Sales-
Total Sales 59,153 58,241 1.6% 157,277 153,044 2.8%
Total Retail Sales- 47,989 47,424 1.2% 126,384 124,459 1.5%
Residential 17,488 17,228 1.5% 42,412 41,352 2.6%
Commercial 15,910 15,472 2.8% 41,903 40,640 3.1%
Industrial 14,348 14,500 -1.0% 41,349 41,770 -1.0%
Other 243 224 8.4% 720 697 3.3%
Total Wholesale Sales 11,164 10,817 3.2% 30,893 28,585 8.1%
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
and 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
2007 2006 %Change 2007 2006 %Change
Consolidated -
Operating Revenues $4,832 $4,549 6.2% $12,013 $11,204 7.2%
Earnings Before Income
Taxes 1,195 1,143 4.5% 2,324 2,119 9.7%
Net Income 762 738 3.3% 1,530 1,385 10.5%
Alabama Power -
Operating Revenues $1,635 $1,572 4.0% $4,168 $3,895 7.0%
Earnings Before Income
Taxes 408 393 3.6% 853 737 15.8%
Net Income Available
to Common 246 238 3.4% 508 438 16.0%
Georgia Power -
Operating Revenues $2,444 $2,275 7.4% $5,945 $5,667 4.9%
Earnings Before Income
Taxes 630 598 5.4% 1,122 1,129 -0.6%
Net Income Available
to Common 399 382 4.5% 719 711 1.1%
Gulf Power -
Operating Revenues $377 $373 0.9% $971 $929 4.6%
Earnings Before Income
Taxes 55 57 -3.6% 121 114 5.8%
Net Income Available
to Common 34 35 -1.2% 74 69 7.7%
Mississippi Power -
Operating Revenues $333 $311 7.2% $863 $775 11.4%
Earnings Before Income
Taxes 56 59 -6.4% 131 121 7.7%
Net Income Available
to Common 34 37 -6.0% 80 75 7.6%
Southern Power -
Operating Revenues $348 $270 28.8% $784 $603 30.0%
Earnings Before Income
Taxes 86 78 10.3% 205 163 25.8%
Net Income Available
to Common 51 46 12.1% 123 98 26.4%
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
and certain classifications may be different from final results
published in the Form 10-Q.
Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/20020207/SOCOLOGO SOURCE: Southern Company CONTACT: Media - Terri Cohilas, +1-404-506-5333, or +1-866-506-5333, Web site: http://www.southerncompany.com/ |