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Southern Company reports first-quarter 2019 earnings

ATLANTA, May 1, 2019 /PRNewswire/ -- Southern Company today reported first-quarter 2019 earnings of $2.08 billion, or $2.01 per share, compared with earnings of $938 million, or 93 cents per share, in the first quarter of 2018. 

Southern Company (PRNewsFoto/Southern Company) (PRNewsfoto/Southern Company)

Excluding the items described in the "Net Income – Excluding Items" table below, Southern Company earned $730 million, or 70 cents per share, during the first quarter of 2019, compared with $893 million, or 88 cents per share, during the first quarter of 2018. 

Non-GAAP Financial Measures



Three Months Ended March

Net Income - Excluding Items (in millions)



2019

2018

Net Income - As Reported



$2,084

$938

Acquisition, Disposition, and Integration Impacts



(2,499)

62

  Tax Impact



1,189

(5)

Estimated Loss on Plants Under Construction



4

44

  Tax Impact



(1)

(11)

Wholesale Gas Services



(63)

(139)

       Tax Impact



16

35

Earnings Guidance Comparability Items:





Adoption of Tax Reform



-

(31)

Net Income – Excluding Items



$730

$893

       Average Shares Outstanding – (in millions)                     



1,038

1,011

Basic Earnings Per Share – Excluding Items



$0.70

$0.88

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 first quarter 2019 were negatively impacted as a result of divested earnings and milder weather at the state-regulated electric utilities.

"Southern Company's major business units are off to a good start for the year," said Chairman, President and CEO Thomas A. Fanning. "I am extremely pleased with our performance year-to-date, and believe we are well-positioned to achieve our financial targets for 2019. In addition, we just completed a review of the Plant Vogtle project and I'm pleased to report that we still expect to meet our targets for cost and the regulatory-approved schedule for the completion of the new nuclear units."

First quarter 2019 operating revenues were $5.41 billion, compared with $6.37 billion for the first quarter of 2018, a decrease of 15.1 percent. This decrease was primarily related to a reduction in revenue resulting from the sale of Gulf Power and other assets that are no longer affiliated with Southern Company.

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

Southern Company's financial analyst call will begin at 8 a.m. Eastern Time today, during which Fanning and Chief Financial Officer Andrew W. Evans 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 (SO) is a leading energy company serving 9 million customers through its subsidiaries. The company provides clean, safe, reliable and affordable energy through electric operating companies in three states, natural gas distribution companies in four states, a competitive generation company serving wholesale customers across America, a leading distributed energy infrastructure company, a fiber optics network and telecommunications services. Southern Company brands are known for excellent customer service, high reliability and affordable prices below the national average. For more than a century, we have been building the future of energy and developing the full portfolio of energy resources, including carbon-free nuclear, advanced carbon capture technologies, natural gas, renewables, energy efficiency and storage technology. Through an industry-leading commitment to innovation and a low-carbon future, Southern Company and its subsidiaries develop the customized energy solutions our customers and communities require to drive growth and prosperity. Our uncompromising values ensure we put the needs of those we serve at the center of everything we do and govern our business to the benefit of our world. Our corporate culture and hiring practices have been recognized nationally by the U.S. Department of Defense, G.I. Jobs magazine, DiversityInc, Black Enterprise, Forbes and the Women's Choice Award. To learn more, visit 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 expected cost and schedule for completion of Plant Vogtle units 3 and 4 and achievement of financial targets. 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, 2018 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 changes, including tax and environmental laws and regulations 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; the extent and timing of costs and legal requirements related to coal combustion residuals; current and future litigation or regulatory investigations, proceedings, or inquiries, including litigation and other disputes related to the Kemper County energy facility; the effects, extent, and timing of the entry of additional competition in the markets in which Southern Company's subsidiaries operate, including from the development and deployment of alternative energy sources; variations in demand for electricity and natural gas; available sources and costs of natural gas and other fuels; the ability to complete necessary or desirable pipeline expansion or infrastructure projects, limits on pipeline capacity, and operational interruptions to natural gas distribution and transmission activities; transmission constraints; effects of inflation; the ability to control costs and avoid cost and schedule overruns during the development, construction, and operation of facilities, including Plant Vogtle Units 3 and 4, which includes components based on new technology that only recently began initial operation in the global nuclear industry at this scale, and including changes in labor costs, availability and productivity; challenges with management of contractors, subcontractors or vendors; adverse weather conditions; shortages, increased costs or inconsistent quality of equipment, materials, and labor; contractor or supplier delay; nonperformance under construction, operating, or other agreements; operational readiness, including specialized operator training and required site safety programs; engineering or design problems; design and other licensing-based compliance matters, including the timely resolution of Inspections, Tests, Analyses, and Acceptance Criteria and the related approvals by the U.S. Nuclear Regulatory Commission ("NRC"); challenges with start-up activities, including major equipment failure and system integration; and/or operational performance; the ability to construct facilities in accordance with the requirements of permits and licenses (including satisfaction of NRC requirements), to satisfy any environmental performance standards and the requirements of tax credits and other incentives, and to integrate facilities into the Southern Company system upon completion of construction; investment performance of the employee and retiree benefit plans and nuclear decommissioning trust funds; advances in technology; ongoing renewable energy partnerships and development agreements; state and federal rate regulations and the impact of pending and future rate cases and negotiations, including rate actions relating to return on equity, equity ratios and fuel and other cost recovery mechanisms; the ability to successfully operate the electric utilities' generating, transmission, and distribution facilities and Southern Company Gas' natural gas distribution and storage facilities and the successful performance of necessary corporate functions; legal proceedings and regulatory approvals and actions related to construction projects, such as Plant Vogtle Units 3 and 4 and pipeline projects, including public service commission approvals and Federal Energy Regulatory Commission and NRC actions; under certain specified circumstances, a decision by holders of more than 10% of the ownership interests of Plant Vogtle Units 3 and 4 not to proceed with construction, and the ability of other Vogtle owners to tender a portion of their ownership interests to Georgia Power following certain construction cost increases; in the event Georgia Power becomes obligated to provide funding to Municipal Electric Authority of Georgia ("MEAG") with respect to the portion of MEAG's ownership interest in Plant Vogtle Units 3 and 4 involving Jacksonville Electric Authority, any inability of Georgia Power to receive repayment of such funding; the inherent risks involved in operating and constructing nuclear generating facilities; the inherent risks involved in transporting and storing natural gas; 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, including the proposed dispositions of Plant Mankato and the Nacogdoches biomass-fueled facility, 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 the Southern Company system's business resulting from cyber intrusion or physical attack and the threat of physical attacks; interest rate fluctuations and financial market conditions and the results of financing efforts; access to capital markets and other financing sources; changes in Southern Company's and any of its subsidiaries' credit ratings; the ability of Southern Company's electric utilities to obtain additional generating capacity (or sell excess generating capacity) at competitive prices; catastrophic events such as fires, earthquakes, explosions, floods, tornadoes, hurricanes and other storms, droughts, pandemic health events or other similar occurrences; the direct or indirect effects on the Southern Company system's business resulting from incidents affecting the U.S. electric grid, natural gas pipeline infrastructure, or operation of generating or storage resources; impairments of goodwill or long-lived assets; and the effect of accounting pronouncements issued periodically by standard-setting bodies. Southern Company expressly disclaims any obligation to update any forward‐looking information.

Southern Company

Financial Highlights

(In Millions of Dollars Except Earnings Per Share)








Three Months Ended
March

Net Income–As Reported (See Notes)


2019


2018






  Traditional Electric Operating Companies


$

565



$

612


  Southern Power


56



121


 Southern Company Gas


270



279


  Total


891



1,012


  Parent Company and Other


1,193



(74)


  Net Income–As Reported


$

2,084



$

938







  Basic Earnings Per Share1


$

2.01



$

0.93







  Average Shares Outstanding (in millions)


1,038



1,011


  End of Period Shares Outstanding (in millions)


1,040



1,012







Non-GAAP Financial Measures


Three Months Ended
March

Net Income–Excluding Items (See Notes)


2019


2018






  Net Income–As Reported


$

2,084



$

938


Acquisition, Disposition, and Integration Impacts2


(2,499)



62


Tax Impact


1,189



(5)


Estimated Loss on Plants Under Construction3


4



44


Tax Impact


(1)



(11)


Wholesale Gas Services4


(63)



(139)


Tax Impact


16



35


Earnings Guidance Comparability Items:





Adoption of Tax Reform5




(31)


  Net Income–Excluding Items


$

730



$

893







  Basic Earnings Per Share–Excluding Items


$

0.70



$

0.88







-See Notes on the following page.

 


Southern Company


Financial Highlights











Notes











(1)

For the three months ended March 31, 2019 and 2018, dilution does not change basic earnings per share by
more than 2 cents and is not material.



(2)

Earnings for the three months ended March 31, 2019 primarily include a $2.5 billion pre-tax gain ($1.3 billion
after tax) on the sale of Gulf Power Company. Earnings for the three months ended March 31, 2018 include:
(i) a $42 million (pre tax and after tax) goodwill impairment charge associated with the sale of Pivotal Home
Solutions and (ii) $20 million pre tax ($15 million after tax) of other acquisition, disposition, and integration
costs. Further impacts are expected to be recorded in 2019 in connection with the sale of Gulf Power
Company, as well as impacts related to Southern Power Company's announced sales of Plants Mankato and
Nacogdoches. Further costs are also expected to continue to occur in connection with the integration of
Southern Company Gas; however, the amount and duration of such expenditures are uncertain.



(3)

Earnings for the three months ended March 31, 2019 and 2018 include charges and associated legal expenses
related to Mississippi Power Company's integrated coal gasification combined cycle facility project in Kemper
County, Mississippi (Kemper IGCC). Additional pre-tax closure costs, including mine reclamation, of up to
$25 million for Mississippi Power Company's Kemper IGCC may occur through 2020. Mississippi Power
Company is also currently evaluating its options regarding the final disposition of the carbon dioxide pipeline
and is in discussions with the Department of Energy regarding property closeout and disposition, for which the
related costs could be material.











(4)

Earnings for the three months ended March 31, 2019 and 2018 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.











(5)

Earnings for the three months ended March 31, 2018 include additional net tax benefits as a result of
implementing federal tax reform legislation, which was signed into law in December 2017. During 2018,
Southern Company obtained and analyzed additional information that was not initially available or reported as
provisional amounts at December 31, 2017. Additional adjustments are not expected. Management also used
such measures to evaluate Southern Company's performance.

 

Southern Company

Significant Factors Impacting EPS










Three Months Ended
March



2019


2018


Change

Earnings Per Share–







As Reported1 (See Notes)


$

2.01



$

0.93



$

1.08









  Significant Factors:







  Traditional Electric Operating Companies






$

(0.05)


Southern Power






(0.06)


Southern Company Gas






(0.01)


Parent Company and Other






1.25


Increase in Shares






(0.05)


  Total–As Reported






$

1.08











Three Months Ended
March

Non-GAAP Financial Measures


2019


2018


Change

Earnings Per Share–







Excluding Items (See Notes)


$

0.70



$

0.88



$

(0.18)









  Total–As Reported






$

1.08


Acquisition, Disposition, and Integration Impacts2






(1.31)


Estimated Loss on Plants Under Construction3






(0.03)


Wholesale Gas Services4






0.05


Adoption of Tax Reform5






0.03


  Total–Excluding Items






$

(0.18)









- See Notes on the following page.

 


Southern Company


Significant Factors Impacting EPS











Notes











(1)

For the three months ended March 31, 2019 and 2018, dilution does not change basic earnings per share by
more than 2 cents and is not material.



(2)

Earnings for the three months ended March 31, 2019 primarily include a $2.5 billion pre-tax gain ($1.3 billion
after tax) on the sale of Gulf Power Company. Earnings for the three months ended March 31, 2018 include:
(i) a $42 million (pre tax and after tax) goodwill impairment charge associated with the sale of Pivotal Home
Solutions and (ii) $20 million pre tax ($15 million after tax) of other acquisition, disposition, and integration
costs. Further impacts are expected to be recorded in 2019 in connection with the sale of Gulf Power
Company, as well as impacts related to Southern Power Company's announced sales of Plants Mankato and
Nacogdoches. Further costs are also expected to continue to occur in connection with the integration of
Southern Company Gas; however, the amount and duration of such expenditures are uncertain.



(3)

Earnings for the three months ended March 31, 2019 and 2018 include charges and associated legal expenses
related to Mississippi Power Company's integrated coal gasification combined cycle facility project in Kemper
County, Mississippi (Kemper IGCC). Additional pre-tax closure costs, including mine reclamation, of up to
$25 million for Mississippi Power Company's Kemper IGCC may occur through 2020. Mississippi Power
Company is also currently evaluating its options regarding the final disposition of the carbon dioxide pipeline
and is in discussions with the Department of Energy regarding property closeout and disposition, for which the
related costs could be material.



(4)

Earnings for the three months ended March 31, 2019 and 2018 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.











(5)

Earnings for the three months ended March 31, 2018 include additional net tax benefits as a result of
implementing federal tax reform legislation, which was signed into law in December 2017. During 2018,
Southern Company obtained and analyzed additional information that was not initially available or reported as
provisional amounts at December 31, 2017. Additional adjustments are not expected. Management also used
such measures to evaluate Southern Company's performance.

 

Southern Company

EPS Earnings Analysis





Description


Three Months Ended
March 
2019 vs. 2018




Retail Sales


$(0.01)




Retail Revenue Impacts


0.05




Weather


(0.07)




Wholesale Operations


(0.01)




Other Operating Revenues


0.03




Non-Fuel O&M


(0.02)




Depreciation and Amortization


(0.02)




Interest Expense


0.01




Other Income and Deductions


0.01




Income Taxes


0.02




Gulf Power Earnings


(0.04)




Total Traditional Electric Operating Companies


$(0.05)




Southern Power


(0.06)




Southern Company Gas


(0.01)




Parent and Other


(0.04)




Increase in Shares


(0.02)




Total Change in EPS (Excluding Items)


$(0.18)




Acquisition, Disposition, and Integration Impacts1


1.31




Estimated Loss on Plants Under Construction2


0.03




Wholesale Gas Services3


(0.05)




Adoption of Tax Reform4


(0.03)




Total Change in EPS (As Reported)


$1.08




- See Notes on the following page.

 


Southern Company


EPS Earnings Analysis


Three Months Ended March 2019 vs. March 2018

Notes



(1)

Earnings for the three months ended March 31, 2019 primarily include a $2.5 billion pre-tax gain ($1.3 billion

after tax) on the sale of Gulf Power Company. Earnings for the three months ended March 31, 2018 include:

(i) a $42 million (pre tax and after tax) goodwill impairment charge associated with the sale of Pivotal Home

Solutions and (ii) $20 million pre tax ($15 million after tax) of other acquisition, disposition, and integration

costs. Further impacts are expected to be recorded in 2019 in connection with the sale of Gulf Power

Company, as well as impacts related to Southern Power Company's announced sales of Plants Mankato and

Nacogdoches. Further costs are also expected to continue to occur in connection with the integration of

Southern Company Gas; however, the amount and duration of such expenditures are uncertain.



(2)

Earnings for the three months ended March 31, 2019 and 2018 include charges and associated legal expenses

related to Mississippi Power Company's integrated coal gasification combined cycle facility project in Kemper

County, Mississippi (Kemper IGCC). Additional pre-tax closure costs, including mine reclamation, of up to

$25 million for Mississippi Power Company's Kemper IGCC may occur through 2020. Mississippi Power

Company is also currently evaluating its options regarding the final disposition of the carbon dioxide pipeline

and is in discussions with the Department of Energy regarding property closeout and disposition, for which the

related costs could be material.



(3)

Earnings for the three months ended March 31, 2019 and 2018 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.



(4)

Earnings for the three months ended March 31, 2018 include additional net tax benefits as a result of

implementing federal tax reform legislation, which was signed into law in December 2017. During 2018,

Southern Company obtained and analyzed additional information that was not initially available or reported as

provisional amounts at December 31, 2017. Additional adjustments are not expected. Management also used

such measures to evaluate Southern Company's performance.

 

Southern Company

Consolidated Earnings

As Reported

(In Millions of Dollars)










Three Months Ended
March



2019


2018


Change

Income Account-







Retail Electric Revenues-







Fuel


$

804



$

1,027



$

(223)


Non-Fuel


2,280



2,541



(261)


Wholesale Electric Revenues


499



623



(124)


Other Electric Revenues


168



161



7


Natural Gas Revenues


1,474



1,607



(133)


Other Revenues


187



413



(226)


Total Revenues


5,412



6,372



(960)


Fuel and Purchased Power


1,020



1,368



(348)


Cost of Natural Gas


686



720



(34)


Cost of Other Sales


118



289



(171)


Non-Fuel O & M


1,312



1,451



(139)


Depreciation and Amortization


751



769



(18)


Taxes Other Than Income Taxes


329



355



(26)


Estimated Loss on Plants Under Construction


2



44



(42)


Gain on Dispositions, net


(2,497)





(2,497)


Total Operating Expenses


1,721



4,996



(3,275)


Operating Income


3,691



1,376



2,315


Allowance for Equity Funds Used During Construction


32



30



2


Earnings from Equity Method Investments


48



41



7


Interest Expense, Net of Amounts Capitalized


430



458



(28)


Other Income (Expense), net


78



60



18


Income Taxes


1,360



113



1,247


Net Income


2,059



936



1,123


Less:







Dividends on Preferred Stock of Subsidiaries


4



4




Net Loss Attributable to Noncontrolling Interests


(29)



(6)



(23)


NET INCOME ATTRIBUTABLE TO SOUTHERN COMPANY


$

2,084



$

938



$

1,146









Notes














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

 

Southern Company

Kilowatt-Hour Sales and Customers

(In Millions of KWHs)


















Three Months Ended March



As Reported


Adjusted1



2019


2018


Change


Weather

Adjusted

Change


2018


Change


Weather

Adjusted

Change

Kilowatt-Hour Sales-















Total Sales


45,167


50,844


(11.2)%




48,222


(6.3)%


















Total Retail Sales-


34,365


38,390


(10.5)%


(7.2)%


35,922


(4.3)%


(1.2)%

Residential


10,902


12,967


(15.9)%


(8.4)%


11,751


(7.2)%


0.4%

Commercial


10,986


12,287


(10.6)%


(8.4)%


11,441


(4.0)%


(1.9)%

Industrial


12,289


12,931


(5.0)%


(5.0)%


12,533


(2.0)%


(2.0)%

Other


188


205


(8.3)%


(7.9)%


197


(4.6)%


(4.2)%
















Total Wholesale Sales


10,802


12,454


(13.3)%


N/A


12,300


(12.2)%


N/A
















Notes






























(1) Kilowatt-hour sales comparisons to the prior year were significantly impacted by the disposition of

Gulf Power Company on January 1, 2019. These 2018 kilowatt-hour sales and changes exclude Gulf Power

Company.
















(In Thousands of Customers)






















Period Ended March











2019


2018


Change

Regulated Utility Customers-













Total Utility Customers-










8,510


9,306


(8.6)%

Total Traditional Electric2








4,234


4,652


(9.0)%

Southern Company Gas3








4,276


4,654


(8.1)%































Notes






























(2) Includes approximately 463,000 customers at March 31, 2018 related to Gulf Power Company, which

was sold on January 1, 2019.
















(3) Includes approximately 407,000 total customers at March 31, 2018 related to Elizabethtown Gas,

Elkton Gas, and Florida City Gas, which were sold in July 2018.

 

Southern Company

Financial Overview

As Reported

(In Millions of Dollars)










Three Months Ended
March



2019


2018


% Change

Southern Company1 –







Operating Revenues


$

5,412



$

6,372



(15.1)

%

Earnings Before Income Taxes


3,419



1,049



225.9

%

Net Income Available to Common


2,084



938



122.2

%








Alabama Power –







Operating Revenues


$

1,408



$

1,473



(4.4)

%

Earnings Before Income Taxes


283



311



(9.0)

%

Net Income Available to Common


217



225



(3.6)

%








Georgia Power –







Operating Revenues


$

1,833



$

1,961



(6.5)

%

Earnings Before Income Taxes


392



445



(11.9)

%

Net Income Available to Common


311



352



(11.6)

%








Mississippi Power –







Operating Revenues


$

287



$

302



(5.0)

%

Earnings (Loss) Before Income Taxes


44



(11)



N/M

Net Income (Loss) Available to Common


37



(7)



N/M








Southern Power1







Operating Revenues


$

443



$

509



(13.0)

%

Earnings Before Income Taxes


18



16



12.5

%

Net Income Available to Common


56



121



(53.7)

%








Southern Company Gas1







Operating Revenues


$

1,474



$

1,639



(10.1)

%

Earnings Before Income Taxes


347



383



(9.4)

%

Net Income Available to Common


270



279



(3.2)

%








N/M - not meaningful














Notes














- See Financial Highlights pages for discussion of certain significant items occurring during the periods presented.


(1)

Financial comparisons to the prior year were impacted by (i) Southern Company Gas' disposition of: (a) Pivotal Home Solutions on June 4, 2018, (b) Elizabethtown Gas and Elkton Gas on July 1, 2018, and (c) Florida City Gas on July 29, 2018; (ii) the disposition of Southern Power Company's ownership interest in Plants Oleander and Stanton on December 4, 2018; (iii) Southern Power Company's sale of (a) a 33% equity interest in a limited partnership indirectly owning substantially all of its solar facilities on May 22, 2018 and (b) a noncontrolling interest in its subsidiary owning eight operating wind facilities on December 11, 2018; and (iv) the disposition of Gulf Power Company on January 1, 2019.


 

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