10-QPeriod: Q3 FY2015

SOUTHERN CO Quarterly Report for Q3 Ended Sep 30, 2015

Filed November 5, 2015For Securities:SOSOJESOJFSOJCSOJDSOMN

Summary

This 10-Q filing for Southern Co. (SO) for the period ending September 29, 2015, primarily details the financial performance of its subsidiary, Alabama Power Company. Alabama Power reported an increase in net income for the third quarter and year-to-date periods compared to the previous year, largely driven by rate increases and a decrease in depreciation expenses. Retail revenues saw a modest increase, supported by rate adjustments, though sales growth remained flat to slightly positive. Key operational aspects for Alabama Power include a reduction in fuel and purchased power expenses, driven by lower fuel costs. However, the company also experienced an increase in other operations and maintenance expenses, particularly employee benefit costs. Significant balance sheet changes involved increases in property, plant, and equipment, cash, and long-term debt, alongside decreases in redeemable preferred and preference stock due to redemptions. The company's financial condition remained stable, with a focus on managing capital and liquidity needs through various market access avenues and credit arrangements.

Financial Highlights

31 data points
Beta

Revenue

$5.40B

Net Income

$970.00M

18.0% Net Margin

EPS (Diluted)

$1.05

Total Assets

$75.22B

Cash & Equivalents

$1.11B

Free Cash Flow

$1.73B

Financial Statements
Beta
Revenue$5.40B
Operating Expenses$3.75B
Operating Income$1.65B
Net Income$970.00M
EPS (Basic)$1.05
EPS (Diluted)$1.05
Shares Outstanding (Basic)910.00M
Shares Outstanding (Diluted)912.00M

Key Highlights

  • 1Alabama Power's net income increased by 4.6% in Q3 2015 and 3.6% year-to-date, primarily due to rate increases and lower depreciation.
  • 2Retail revenues for Alabama Power increased by 3.0% in Q3 2015 and 2.3% year-to-date, driven by rate and pricing adjustments.
  • 3Fuel and purchased power expenses decreased for Alabama Power in both Q3 and year-to-date periods due to lower fuel costs.
  • 4Other operations and maintenance expenses increased for Alabama Power, notably employee benefit costs, and nuclear generation costs.
  • 5Alabama Power saw significant balance sheet changes, including a $829 million increase in property, plant, and equipment and a $523 million increase in long-term debt.
  • 6The company's financial condition remained stable, with $609 million in cash and cash equivalents at quarter-end.
  • 7Market risk disclosures indicated no material changes from the prior year's 10-K.

Frequently Asked Questions

The increase in net income for Alabama Power was primarily driven by a rate increase under its Rate Stabilization and Equalization (Rate RSE) mechanism, effective January 1, 2015, and a decrease in depreciation expenses. These factors were partially offset by increases in other operating expenses.

Alabama Power's retail revenues increased by 3.0% in the third quarter of 2015 to $1.56 billion compared to $1.51 billion in the prior year. Year-to-date, retail revenues were up 2.3% to $4.15 billion from $4.06 billion. This growth was primarily attributed to rate and pricing adjustments.

Significant balance sheet changes for Alabama Power in the first nine months of 2015 included an increase of $829 million in property, plant, and equipment, mainly due to additions in distribution, environmental, transmission, and steam generation. Long-term debt also increased by $523 million, largely from new senior note issuances. Cash and cash equivalents increased by $336 million, while redeemable preferred and preference stock decreased by $404 million due to redemptions.

Alabama Power's financial condition remained stable. The company intends to monitor its access to short-term and long-term capital markets, as well as its bank credit arrangements, to meet future capital and liquidity needs. At the end of the third quarter, the company had $609 million in cash and cash equivalents and had amended its credit facility to extend its maturity to 2020.