-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TfuJDVql3CCyU11puh6NeCr2sJsSZDzyCpOYTUzdKsIN6o2Pdb6nsF2hk8r3mDOB myYAx2VTbrMDX3QLKtF0gw== 0000092122-98-000064.txt : 19980518 0000092122-98-000064.hdr.sgml : 19980518 ACCESSION NUMBER: 0000092122-98-000064 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTHERN CO CENTRAL INDEX KEY: 0000092122 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 580690070 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-03526 FILM NUMBER: 98624743 BUSINESS ADDRESS: STREET 1: 270 PEACHTREE ST CITY: ATLANTA STATE: GA ZIP: 30303 BUSINESS PHONE: 4045060540 MAIL ADDRESS: STREET 1: 270 PEACHTREE STREET CITY: ATLANTA STATE: GA ZIP: 30303 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALABAMA POWER CO CENTRAL INDEX KEY: 0000003153 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 630004250 STATE OF INCORPORATION: AL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-03164 FILM NUMBER: 98624744 BUSINESS ADDRESS: STREET 1: 600 N 18TH ST STREET 2: P O BOX 2641 CITY: BIRMINGHAM STATE: AL ZIP: 35291 BUSINESS PHONE: 2052501000 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GEORGIA POWER CO CENTRAL INDEX KEY: 0000041091 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 580257110 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06468 FILM NUMBER: 98624745 BUSINESS ADDRESS: STREET 1: 333 PIEDMONT AVE NE CITY: ATLANTA STATE: GA ZIP: 30308 BUSINESS PHONE: 4045266526 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GULF POWER CO CENTRAL INDEX KEY: 0000044545 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 590276810 STATE OF INCORPORATION: ME FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-02429 FILM NUMBER: 98624746 BUSINESS ADDRESS: STREET 1: 500 BAYFRONT PKWY CITY: PENSACOLA STATE: FL ZIP: 32501 BUSINESS PHONE: 9044446111 MAIL ADDRESS: STREET 1: 500 BAYFRONT PARKWAY CITY: PENSACOLA STATE: FL ZIP: 32501 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MISSISSIPPI POWER CO CENTRAL INDEX KEY: 0000066904 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 640205820 STATE OF INCORPORATION: MS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-11229 FILM NUMBER: 98624747 BUSINESS ADDRESS: STREET 1: 2992 W BEACH CITY: GULFPORT STATE: MS ZIP: 39501 BUSINESS PHONE: 2288641211 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SAVANNAH ELECTRIC & POWER CO CENTRAL INDEX KEY: 0000086940 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 580418070 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-05072 FILM NUMBER: 98624748 BUSINESS ADDRESS: STREET 1: 600 BAY ST EAST CITY: SAVANNAH STATE: GA ZIP: 31401 BUSINESS PHONE: 9122327171 10-Q 1 FIRST QUARTER 1998
=================================================================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------- FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended March 31, 1998 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from _____to_____ Commission Registrant, State of Incorporation, I.R.S. Employer File Number Address and Telephone Number Identification No. 1-3526 The Southern Company 58-0690070 (A Delaware Corporation) 270 Peachtree Street, N.W. Atlanta, Georgia 30303 (770) 393-0650 1-3164 Alabama Power Company 63-0004250 (An Alabama Corporation) 600 North 18th Street Birmingham, Alabama 35291 (205) 257-1000 1-6468 Georgia Power Company 58-0257110 (A Georgia Corporation) 241 Ralph McGill Boulevard, N.E. Atlanta, Georgia 30308 (404) 506-6526 0-2429 Gulf Power Company 59-0276810 (A Maine Corporation) 500 Bayfront Parkway Pensacola, Florida 32501 (850) 444-6111 0-6849 Mississippi Power Company 64-0205820 (A Mississippi Corporation) 2992 West Beach Gulfport, Mississippi 39501 (601) 864-1211 1-5072 Savannah Electric and Power Company 58-0418070 (A Georgia Corporation) 600 East Bay Street Savannah, Georgia 31401 (912) 644-7171 ===================================================================================================================
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes X No___
Description of Shares Outstanding Registrant Common Stock at April 30, 1998 The Southern Company Par Value $5 Per Share 697,380,782 Alabama Power Company Par Value $40 Per Share 5,608,955 Georgia Power Company No Par Value 7,761,500 Gulf Power Company No Par Value 992,717 Mississippi Power Company Without Par Value 1,121,000 Savannah Electric and Power Company Par Value $5 Per Share 10,844,635
This combined Form 10-Q is separately filed by The Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company and Savannah Electric and Power Company. Information contained herein relating to any individual company is filed by such company on its own behalf. Each company makes no representation as to information relating to the other companies.
INDEX TO QUARTERLY REPORT ON FORM 10-Q March 31, 1998 Page Number DEFINITIONS........................................................................................................ 4 PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) and Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition The Southern Company and Subsidiary Companies Condensed Consolidated Statements of Income........................................................ 6 Condensed Consolidated Statements of Cash Flows.................................................... 7 Condensed Consolidated Balance Sheets.............................................................. 8 Consolidated Statements of Comprehensive Income.................................................... 10 Management's Discussion and Analysis of Results of Operations and Financial Condition.............. 11 Alabama Power Company Condensed Statements of Income..................................................................... 16 Condensed Statements of Cash Flows................................................................. 17 Condensed Balance Sheets........................................................................... 18 Management's Discussion and Analysis of Results of Operations and Financial Condition.............. 20 Exhibit 1 - Report of Independent Public Accountants............................................... 23 Georgia Power Company Condensed Statements of Income..................................................................... 25 Condensed Statements of Cash Flows................................................................. 26 Condensed Balance Sheets........................................................................... 27 Management's Discussion and Analysis of Results of Operations and Financial Condition.............. 29 Exhibit 1 - Report of Independent Public Accountants............................................... 33 Gulf Power Company Condensed Statements of Income..................................................................... 35 Condensed Statements of Cash Flows................................................................. 36 Condensed Balance Sheets........................................................................... 37 Management's Discussion and Analysis of Results of Operations and Financial Condition.............. 39 Mississippi Power Company Condensed Statements of Income..................................................................... 43 Condensed Statements of Cash Flows................................................................. 44 Condensed Balance Sheets........................................................................... 45 Management's Discussion and Analysis of Results of Operations and Financial Condition.............. 47 Savannah Electric and Power Company Condensed Statements of Income..................................................................... 51 Condensed Statements of Cash Flows................................................................. 52 Condensed Balance Sheets........................................................................... 53 Management's Discussion and Analysis of Results of Operations and Financial Condition.............. 55 Notes to the Condensed Financial Statements........................................................... 58 Item 3. Quantitative and Qualitative Disclosures about Market Risk............................................ 59 PART II - OTHER INFORMATION Item 1. Legal Proceedings......................................................................................... 64 Item 2. Changes in Securities..................................................................................... Inapplicable Item 3. Defaults Upon Senior Securities........................................................................... Inapplicable Item 4. Submission of Matters to a Vote of Security Holders....................................................... Inapplicable Item 5. Other Information......................................................................................... Inapplicable Item 6. Exhibits and Reports on Form 8-K.......................................................................... 64 Signatures ............................................................................................... 66 3
DEFINITIONS TERM MEANING affiliates.................................. ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH ALABAMA..................................... Alabama Power Company BEWAG....................................... Berliner Kraft und Licht AG CEPA........................................ Consolidated Electric Power Asia Clean Air Act............................... Clean Air Act Amendments of 1990 ECO Plan.................................... Environmental Compliance Overview Plan Energy Act.................................. Energy Policy Act of 1992 EWG......................................... Exempt wholesale generator FASB........................................ Financial Accounting Standards Board FERC........................................ Federal Energy Regulatory Commission Form 10-K................................... Combined Annual Report on Form 10-K of SOUTHERN, ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH for the year ended December 31, 1997 FUCO........................................ Foreign utility company GEORGIA..................................... Georgia Power Company GULF........................................ Gulf Power Company MISSISSIPPI................................. Mississippi Power Company Mobile Energy............................... Mobile Energy Services Company, L.L.C. and Mobile Energy Services Holdings, Inc. OPC......................................... Oglethorpe Power Corporation operating affiliates........................ see affiliates operating companies......................... see affiliates PEP......................................... Performance Evaluation Plan PSC......................................... Public Service Commission SAVANNAH.................................... Savannah Electric and Power Company SEC......................................... Securities and Exchange Commission SOUTHERN.................................... The Southern Company Southern Energy............................. Southern Energy, Inc. (formerly Southern Electric International, Inc.), including SOUTHERN subsidiaries managed or controlled by Southern Energy SWEB........................................ South Western Electricity plc (United Kingdom) TVA......................................... Tennessee Valley Authority
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION This Quarterly Report on Form 10-Q includes forward-looking statements in addition to historical information. The registrants caution that there are various important factors that could cause actual results to differ materially from those indicated in the forward-looking statements; accordingly, there can be no assurance that such indicated results will be realized. These factors include legislative and regulatory initiatives regarding deregulation and restructuring of the electric utility industry; the extent and timing of the entry of additional competition in the markets of SOUTHERN's subsidiaries; potential business strategies, including acquisitions or dispositions of assets or internal restructuring, that may be pursued by the registrants; state and federal rate regulation in the United States; changes in or application of environmental and other laws and regulations to which SOUTHERN and its subsidiaries are subject; political, legal and economic conditions and developments in the United States and in foreign countries in which the subsidiaries operate; financial market conditions and the results of financing efforts; changes in commodity prices and interest rates; weather and other natural phenomena; the performance of projects undertaken by the non-traditional business and the success of efforts to invest in and develop new opportunities; and other factors discussed elsewhere herein and in other reports (including Form 10-K) filed from time to time by the registrants with the SEC. 4 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES 5
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (Stated in Thousands of Dollars) For the Three Months Ended March 31, 1998 1997 OPERATING REVENUES $ 2,513,715 $ 2,584,414 -------------- -------------- OPERATING EXPENSES: Operation-- Fuel 474,328 485,755 Purchased power 307,999 458,241 Other (Note G) 461,720 425,347 Maintenance 199,988 191,292 Depreciation and amortization 324,299 292,124 Amortization of deferred Plant Vogtle costs (Note N) 7,786 37,627 Taxes other than income taxes 147,332 151,694 Income taxes 142,113 146,182 -------------- -------------- Total operating expenses 2,065,565 2,188,262 -------------- -------------- OPERATING INCOME 448,150 396,152 OTHER INCOME: Allowance for equity funds used during construction 503 791 Interest income 37,905 28,084 Other, net 29,498 14,210 Income taxes applicable to other income 13,214 4,439 -------------- -------------- INCOME BEFORE INTEREST CHARGES 529,270 443,676 -------------- -------------- INTEREST CHARGES AND OTHER: Interest on long-term debt 174,277 152,200 Allowance for debt funds used during construction (2,519) (4,596) Interest on notes payable 28,902 29,319 Amortization of debt discount, premium and expense, net 6,957 7,520 Other interest charges 21,627 18,123 Minority interest in subsidiaries 16,587 15,519 Distributions on capital and preferred securities of subsidiary companies 35,097 21,523 Preferred dividends of subsidiary companies 6,640 17,055 -------------- -------------- Interest charges and other, net 287,568 256,663 -------------- -------------- CONSOLIDATED NET INCOME $ 241,702 $ 187,013 ============== ============== AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING (Thousands) 695,051 678,826 BASIC AND DILUTED EARNINGS PER SHARE OF COMMON STOCK $0.35 $0.28 CASH DIVIDENDS PAID PER SHARE OF COMMON STOCK $0.335 $0.325 The accompanying notes as they relate to SOUTHERN are an integral part of these condensed statements. 6
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Stated in Thousands of Dollars) For the Three Months Ended March 31, 1998 1997 OPERATING ACTIVITIES: Consolidated net income $ 241,702 $ 187,013 Adjustments to reconcile net income to net cash provided by operating activities-- Depreciation and amortization 380,170 347,829 Deferred income taxes and investment tax credits (10,980) (6,835) Allowance for equity funds used during construction (503) (791) Amortization of deferred Plant Vogtle costs (Note N) 7,786 37,627 Gain on asset sales (142) (15,593) Other, net 35,716 (50,564) Changes in certain current assets and liabilities-- Receivables, net 390,573 229,542 Fossil fuel stock (68,431) (30,419) Materials and supplies (255) 13,491 Prepayments (46,615) (50,864) Payables (341,549) (58,783) Taxes Accrued 52,966 76,707 Other (76,572) (93,215) ---------------- ---------------- Net cash provided from operating activities 563,866 585,145 ---------------- ---------------- INVESTING ACTIVITIES: Gross property additions (438,163) (377,836) Southern Energy business acquisitions (154,625) (1,755,064) Sales of property 85 15,350 Other (61,192) (45,932) ---------------- ---------------- Net cash used for investing activities (653,895) (2,163,482) ---------------- ---------------- FINANCING ACTIVITIES: Proceeds-- Common stock 89,372 88,528 Capital and preferred securities 45,000 932,000 Pollution control obligations 89,990 - Other long-term debt 523,300 998,133 Notes Receivable 58,839 Retirements-- Preferred stock (87) (203,528) First mortgage bonds (234,740) (83,574) Other long-term debt (46,106) (252,728) Special deposits-redemption funds (89,989) 44,454 Notes payable, net (218,465) 458,762 Payment of common stock dividends (232,449) (220,194) Miscellaneous (18,196) (78,455) ---------------- ---------------- Net cash provided from (used for) financing activities (33,531) 1,683,398 ---------------- ---------------- NET CHANGE IN CASH AND CASH EQUIVALENTS (123,560) 105,061 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 600,820 444,832 ---------------- ---------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 477,260 $ 549,893 ================ ================ SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for-- Interest (net of amount capitalized) $307,297 $213,978 Income taxes $45,480 $3,956 Southern Energy business acquisitions-- Fair value of assets acquired $154,625 $3,551,064 Less cash paid for common stock 154,625 1,755,064 -------------- -------------- Liabilities assumed - $1,796,000 ============== ============== The accompanying notes as they relate to SOUTHERN are an integral part of these condensed statements. 7
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED BALANCE SHEETS (Stated in Thousands of Dollars) ASSETS At March 31, 1998 At December 31, (Unaudited) 1997 ----------------- ------------------ UTILITY PLANT: Plant in service $ 34,240,312 $ 34,044,182 Less accumulated provision for depreciation 12,244,545 11,933,718 --------------- ---------------- 21,995,767 22,110,464 Nuclear fuel, at amortized cost 206,974 230,154 Construction work in progress 1,496,220 1,311,540 --------------- ---------------- Total 23,698,961 23,652,158 --------------- ---------------- OTHER PROPERTY AND INVESTMENTS: Goodwill, being amortized 1,903,042 1,887,574 Leasehold interests 1,356,345 1,388,928 Equity investments in subsidiaries 1,344,695 1,167,739 Long-term notes receivable 465,687 460,448 Nuclear decommissioning trusts, at market 442,872 387,425 Miscellaneous 262,615 281,488 --------------- ---------------- Total 5,775,256 5,573,602 --------------- ---------------- CURRENT ASSETS: Cash and cash equivalents 477,260 600,820 Special deposits 138,621 103,462 Receivables, less accumulated provisions for uncollectible accounts of $77,291 at March 31, 1998 and $77,056 at December 31, 1997 1,522,928 2,014,117 Fossil fuel stock, at average cost 285,682 217,251 Materials and supplies, at average cost 492,771 492,516 Prepayments 143,510 98,398 Vacation pay deferred 78,663 78,866 --------------- ---------------- Total 3,139,435 3,605,430 --------------- ---------------- DEFERRED CHARGES: Deferred charges related to income taxes 1,129,564 1,142,045 Prepaid pension costs 425,668 398,736 Deferred Plant Vogtle costs (Note N) 42,626 50,412 Debt expense, being amortized 102,770 101,068 Premium on reacquired debt, being amortized 280,581 285,149 Miscellaneous 428,378 461,910 --------------- ---------------- Total 2,409,587 2,439,320 --------------- ---------------- TOTAL ASSETS $ 35,023,239 $ 35,270,510 =============== ================ The accompanying notes as they relate to SOUTHERN are an integral part of these condensed statements. 8
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED BALANCE SHEETS (Stated in Thousands of Dollars) CAPITALIZATION AND LIABILITIES At March 31, 1998 At December 31, (Unaudited) 1997 ---------------- ------------------ CAPITALIZATION: Common stock, par value $5 per share- Authorized -- 1 billion shares Outstanding -- March 31, 1998: 696,946,972 shares -- December 31, 1997: 693,423,039 shares $ 3,484,735 $ 3,467,115 Paid-in capital 2,400,654 2,330,538 Retained earnings 3,849,057 3,842,135 Accumulated other comprehensive income 9,206 7,176 ---------------- ---------------- 9,743,652 9,646,964 Preferred stock of subsidiaries 452,575 493,346 Subsidiary obligated mandatorily redeemable capital and preferred securities 1,789,980 1,743,520 Long-term debt 10,419,758 10,273,606 ---------------- ---------------- Total 22,405,965 22,157,436 ---------------- ---------------- CURRENT LIABILITIES: Preferred stock of subsidiaries due within one year 40,684 - Amount of securities due within one year 894,008 783,805 Notes payable 1,945,239 2,064,249 Accounts payable 630,926 1,048,266 Customer deposits 131,592 133,018 Taxes accrued-- Income taxes 233,700 119,782 Other 196,409 259,297 Interest accrued 188,880 261,668 Vacation pay accrued 109,320 108,207 Miscellaneous 504,983 608,761 ---------------- ---------------- Total 4,875,741 5,387,053 ---------------- ---------------- DEFERRED CREDITS AND OTHER LIABILITIES: Accumulated deferred income taxes 4,631,596 4,649,826 Deferred credits related to income taxes 747,808 745,674 Accumulated deferred investment tax credits 746,309 753,861 Employee benefits provisions 462,193 447,188 Minority interests in subsidiaries 451,965 434,987 Prepaid capacity revenues 106,615 109,982 Department of Energy assessments 72,193 72,193 Disallowed Plant Vogtle capacity buyback costs 55,520 55,856 Storm damage reserves 39,466 38,407 Miscellaneous 427,868 418,047 ---------------- ---------------- Total 7,741,533 7,726,021 ---------------- ---------------- TOTAL CAPITALIZATION AND LIABILITIES $ 35,023,239 $ 35,270,510 ================ ================ The accompanying notes as they relate to SOUTHERN are an integral part of these condensed statements. 9
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Stated in Thousands of Dollars) For the Three Months Ended March 31 ----------------------------------------- 1998 1997 ---- ---- Consolidated net income $241,702 $187,013 Other comprehensive income: Foreign currency translation adjustments 3,123 (15,034) Less Applicable income taxes 1,093 (5,262) ----------- ----------- CONSOLIDATED COMPREHENSIVE INCOME $243,732 $177,241 ======== ======== - ---------------------------------------------------------------------------------- --------------------- ------------------- THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE INCOME (Stated in Thousands of Dollars) At March 31, 1998 At December 31, 1997 Balance at beginning of period $7,176 $13,689 Change in current period 2,030 (6,513) ------- --------- BALANCE AT END OF PERIOD $9,206 $ 7,176 ====== ======== - ------------------------------------------------------------------------- ----------------------- ----------------------------
10 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FIRST QUARTER 1998 vs. FIRST QUARTER 1997 RESULTS OF OPERATIONS Earnings SOUTHERN's consolidated net income for the first quarter 1998 was $242 million ($0.35 per share) compared to $187 million ($0.28 per share) for the corresponding period of 1997. Earnings from non-traditional operations positively impacted net income during the first quarter. SOUTHERN's traditional core business is primarily represented by its five domestic electric utility operating companies, which provide electric service in four Southeastern states. Another significant portion of SOUTHERN's business is its non-traditional business primarily represented by Southern Energy, which owns and manages international and domestic businesses for SOUTHERN. Businesses acquired by Southern Energy have been included in the consolidated statements of income since the date of acquisition. Certain changes in operating revenues and expenses from the prior period are the result of such acquisitions. Significant income statement items appropriate for discussion include the following:
Increase (Decrease) -------------------------------------- (in thousands) % Operating revenues................................ $ (70,699) (2.7) Purchased power expense........................... (150,242) (32.8) Depreciation and amortization..................... 32,175 11.0 Amortization of deferred Plant Vogtle costs....... (29,841) (79.3) Interest income................................... 9,821 35.0 Income taxes applicable to other income........... 8,775 197.7 Interest on long-term debt........................ 22,077 14.5 Distributions on capital and preferred securities of subsidiary companies............. 13,574 63.1 Preferred dividends of subsidiary companies...................................... (10,415) (61.1)
Operating revenues. Operating revenues for the traditional core business for the first quarter increased $47 million or 2.5% compared to the corresponding period of 1997. Operating revenues for non-traditional business were down $117 million or 17.3% for the quarter due primarily to a change in the method of reporting for Southern Energy's energy marketing organization. (See Note (D) in the "Notes to Condensed Financial Statements" herein.) The increase in first quarter traditional core revenues was mainly due to a 4.4% increase in energy sales during the quarter. Energy sales to the residential, commercial and industrial sectors increased by 8.1%, 2.3% and 3.3%, respectively. 11 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Purchased power expense. For the first quarter, purchased power expenses for the traditional core business rose by $41.4 million or 130.1%. The increase for the quarter was primarily due to increased energy sales to residential, commercial and industrial customers. For non-traditional business, purchased power expenses declined by $192 million, or 44.9%, as compared to the corresponding period of 1997. As stated above, the primary reason for this decline is due to a change in the method of reporting for the power purchasing activities of Southern Energy's energy marketing organization. Depreciation and amortization expense. Depreciation and amortization expense of the traditional core business for the quarter increased compared to the corresponding period in 1997. This increase can be attributed primarily to additions to utility plant and to additional depreciation charges of $12.2 million for the quarter pursuant to GEORGIA's retail accounting order as discussed in Note (M) in the "Notes to the Condensed Financial Statements" herein. Amortization of deferred Plant Vogtle costs. The costs decreased for the quarter due to the completion in September 1997 of the amortization of levelized buybacks and Plant Vogtle Unit 1 cost deferrals under the 1987 Georgia PSC order. See Note (N) in the "Notes to the Condensed Financial Statements", herein for further details. Interest income. The increase in interest income for the quarter as compared to the corresponding period of 1997, is due to a $7.5 million increase in interest income for the non-traditional business, primarily CEPA. Income taxes applicable to other income. The increase for the quarter when compared to the same period in 1997 is primarily due to certain acquisitions by Southern Energy, specifically BEWAG and an energy-related alternative fuel company. Interest on long-term debt. Interest on long-term debt for the quarter compared to the same period of 1997, increased primarily due to the CEPA and BEWAG acquisitions. Southern Energy's interest on long-term debt increased $23.0 million for the quarter compared to the corresponding period in 1997, mainly as a result of those acquisitions. Distributions on capital and preferred securities of subsidiaries. This increase for the quarter resulted from the sales of capital and preferred securities in 1997 and the first quarter of 1998. Preferred dividends of subsidiary companies. The decrease in this item for the quarter when compared to the corresponding period in 1997 is due to redemptions of preferred stock. See "Financing Activities" herein for additional information. Future Earnings Potential The results of operations discussed above are not necessarily indicative of future earnings potential. The level of future earnings depends on numerous factors ranging from energy sales growth to a less regulated, more competitive environment, with non-traditional business becoming more significant. For information relating to non-traditional business activities, see Item 1 - BUSINESS - "Non-Traditional Business" in the Form 10-K. 12 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION With the enactment of the Energy Act and new legislation being discussed at federal and state levels to expand customer choice, SOUTHERN is positioning the business to meet the challenge of increasing competition. For additional information, see Item 1 - BUSINESS - "Competition" and Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings Potential" of SOUTHERN in the Form 10-K. Compliance costs related to the Clean Air Act could affect earnings if such costs cannot be offset. For additional information about the Clean Air Act and other environmental issues, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS "Environmental Matters" of SOUTHERN in the Form 10-K. In March 1998, The American Institute of Certified Public Accountants issued a new Statement of Position (SOP), Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. The SOP, which must be adopted by 1999, requires capitalization of costs of internal-use software. Adoption of the SOP is not expected to have a material impact on the financial statements. Reference is made to Notes (B), (C), (D), (E), (F), (G), (H), (I), (K) through (P) and (R) in the "Notes to the Condensed Financial Statements" herein for discussion of various contingencies and other matters which may affect future earnings potential. Reference is also made to Part II - Item 1 - "Legal Proceedings" herein. FINANCIAL CONDITION Overview Major changes in SOUTHERN's financial condition during the first three months of 1998 included the addition of approximately $438 million to utility plant. The funds for these additions and other capital requirements were from operations and sales of securities. See SOUTHERN's Condensed Statements of Cash Flows for further details. Financing Activities During the first three months of 1998, retirements of the operating companies' first mortgage bonds totaled $235 million. A subsidiary of GULF formed a statutory business trust which sold, during the first three months of 1998, $45 million of trust preferred securities. See Note (J) in the "Notes to the Condensed Financial Statements" herein for further details. Also during the first quarter of 1998, ALABAMA issued $200.0 million of 7% senior notes and GEORGIA issued $145.0 million of 6 7/8% senior notes, both due December 31, 2047. During the first three months of 1998, SOUTHERN raised $89 million from the issuance of new common stock under SOUTHERN's various stock plans. The market price of SOUTHERN's common stock at March 31, 1998 was $27.6875 per share and the book value was $13.98 per share, representing a market-to-book ratio of 198%, compared to $25.875, $13.91 and 186%, respectively, at the end of 1997. The dividend for the first quarter of 1998 was $0.335 per share. 13 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Capital Requirements Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS of SOUTHERN under "Capital Requirements for Construction," "Environmental Matters" and "Other Capital Requirements" in the Form 10-K for a description of the Southern electric system's capital requirements for its construction program, environmental compliance efforts, sinking fund requirements and maturing debt. Approximately $935 million will be required by March 31, 1999, for present sinking fund requirements, redemption of preferred stock and redemptions and maturities of long-term debt. Also, the operating companies plan to continue, to the extent possible, a program to retire higher-cost debt and preferred stock and replace these securities with lower-cost capital. Sources of Capital In addition to the financing activities previously described, SOUTHERN may require additional equity capital during the remainder of the year. The amounts and timing of additional equity capital to be raised in 1998, as well as in subsequent years, will be contingent on SOUTHERN's investment opportunities. The operating companies plan to obtain the funds required for construction and other purposes from sources similar to those used in the past. The amount, type and timing of any financings--if needed--will depend upon maintenance of adequate earnings, regulatory approval, prevailing market conditions and other factors. See Item 1 - BUSINESS - "Financing Programs" in the Form 10-K for additional information. To meet short-term cash needs and contingencies, the SOUTHERN system had at March 31, 1998, approximately $477 million of cash and cash equivalents and approximately $4.5 billion of unused credit arrangements with banks (including $1,160 million of such arrangements under which borrowings may be made only to fund purchase obligations of the operating companies relating to variable rate pollution control bonds). At March 31, 1998, the system companies had outstanding approximately $652 million of short-term notes payable and $1,160 million of commercial paper. Management believes that the need for working capital can be adequately met by utilizing lines of credit without maintaining large cash balances. See Note (D) in the "Notes to the Condensed Financial Statements" herein for discussion of financial derivative contracts entered into by SOUTHERN. 14 ALABAMA POWER COMPANY 15
ALABAMA POWER COMPANY CONDENSED STATEMENTS OF INCOME (UNAUDITED) (Stated in Thousands of Dollars) For the Three Months Ended March 31, 1998 1997 OPERATING REVENUES: Revenues $ 674,295 $ 658,105 Revenues from affiliates 42,210 46,663 ------------ ------------- Total operating revenues 716,505 704,768 ------------ ------------- OPERATING EXPENSES: Operation-- Fuel 193,022 204,358 Purchased power from non-affiliates 17,535 3,374 Purchased power from affiliates 18,632 20,058 Other 114,813 114,278 Maintenance 63,533 68,950 Depreciation and amortization 86,239 85,652 Taxes other than income taxes 49,439 49,457 Federal and state income taxes 42,557 35,186 ------------ ------------- Total operating expenses 585,770 581,313 ------------ ------------- OPERATING INCOME 130,735 123,455 OTHER INCOME (EXPENSE): Allowance for equity funds used during construction 285 - Income from subsidiary 1,082 980 Interest income 13,670 11,090 Other, net (8,476) (8,372) Income taxes applicable to other income 2,177 (708) ------------ ------------- INCOME BEFORE INTEREST CHARGES 139,473 126,445 ------------ ------------- INTEREST CHARGES AND OTHER: Interest on long-term debt 44,718 41,383 Allowance for debt funds used during construction (652) (946) Interest on interim obligations 4,406 4,406 Amortization of debt discount, premium and expense, net 2,424 2,396 Other interest charges 13,620 10,704 Distributions on preferred securities of subsidiary companies 5,588 4,997 ------------ ------------- Total Interest charges and other 70,104 62,940 ------------ ------------- NET INCOME 69,369 63,505 DIVIDENDS ON PREFERRED STOCK 3,328 5,698 ------------ ------------- NET INCOME AFTER DIVIDENDS ON PREFERRED STOCK $ 66,041 $ 57,807 ============ ============= The accompanying notes as they relate to ALABAMA are an integral part of these condensed statements. 16
ALABAMA POWER COMPANY CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (Stated in Thousands of Dollars) For the Three Months Ended March 31, 1998 1997 OPERATING ACTIVITIES: Net income $ 69,369 $ 63,505 Adjustments to reconcile net income to net cash provided by operating activities-- Depreciation and amortization 102,837 101,987 Deferred income taxes and investment tax credits, net (11,359) (2,380) Allowance for equity funds used during construction (285) - Other, net 14,056 (44,558) Changes in certain current assets and liabilities-- Receivables, net 82,947 48,292 Inventories (18,734) (16,130) Prepayments (37,195) (38,969) Payables (74,852) (76,068) Taxes accrued 64,796 53,076 Energy cost recovery, retail 24,254 14,656 Other (45,635) (39,157) ------------- ------------ Net cash provided from operating activities 170,199 64,254 -------------- -------------- INVESTING ACTIVITIES: Gross property additions (132,763) (94,605) Other (18,781) (9,469) ------------- ------------ Net cash used for investing activities (151,544) (104,074) -------------- -------------- FINANCING ACTIVITIES: Proceeds-- Company obligated mandatorily redeemable preferred securities - 200,000 Other long-term debt 200,000 Retirements-- Preferred stock - (100,000) First mortgage bonds (74,345) (19,801) Other long-term debt (238) (232) Interim obligations, net (47,867) 48,933 Payment of preferred stock dividends (3,350) (6,730) Payment of common stock dividends (90,400) (80,100) Miscellaneous (7,706) (6,361) ------------- ------------ Net cash provided from (used for) financing activities (23,906) 35,709 -------------- -------------- NET CHANGE IN CASH AND CASH EQUIVALENTS (5,251) (4,111) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 23,957 9,587 -------------- -------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 18,706 $ 5,476 ============== ============== SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for-- Interest (net of amount capitalized) $ 65,401 $ 58,030 Income taxes 2,990 3,009 The accompanying notes as they relate to ALABAMA are an integral part of these condensed statements.
17
ALABAMA POWER COMPANY CONDENSED BALANCE SHEETS (Stated in Thousands of Dollars) ASSETS At March 31, 1998 At December 31, (Unaudited) 1997 ---------------- ----------------- UTILITY PLANT: Plant in service $ 11,117,672 $ 11,070,323 Less accumulated provision for depreciation 4,470,173 4,384,180 ---------------- --------------- 6,647,499 6,686,143 Nuclear fuel, at amortized cost 91,571 103,272 Construction work in progress 381,898 311,223 ---------------- --------------- Total 7,120,968 7,100,638 ---------------- --------------- OTHER PROPERTY AND INVESTMENTS: Southern Electric Generating Company, at equity 24,705 24,972 Nuclear decommissioning trusts 204,313 193,008 Miscellaneous 22,578 22,233 ---------------- --------------- Total 251,596 240,213 ---------------- --------------- CURRENT ASSETS: Cash and cash equivalents 18,706 23,957 Receivables-- Customer accounts receivable 312,243 368,255 Other accounts and notes receivable 19,067 28,921 Affiliated companies 32,623 50,353 Accumulated provision for uncollectible accounts (2,502) (2,272) Refundable income taxes 879 - Fossil fuel stock, at average cost 101,974 74,186 Materials and supplies, at average cost 152,547 161,601 Prepayments 57,648 20,453 Vacation pay deferred 28,783 28,783 ---------------- --------------- Total 721,968 754,237 ---------------- --------------- DEFERRED CHARGES: Deferred charges related to income taxes 385,641 384,549 Debt expense, being amortized 6,701 7,276 Premium on reacquired debt, being amortized 79,908 81,417 Prepaid pension costs 139,678 130,733 Department of Energy assessments 34,416 34,416 Miscellaneous 76,202 79,388 ---------------- --------------- Total 722,546 717,779 ---------------- --------------- TOTAL ASSETS $ 8,817,078 $ 8,812,867 ================ =============== The accompanying notes as they relate to ALABAMA are an integral part of these condensed statements.
18
ALABAMA POWER COMPANY CONDENSED BALANCE SHEETS (Stated in Thousands of Dollars) CAPITALIZATION AND LIABILITIES At March 31, 1998 At December 31, (Unaudited) 1997 -------------- ---------------- CAPITALIZATION: Common stock equity-- Common stock (par value $40 per share)-- authorized 6,000,000 shares; outstanding 5,608,955 shares $ 224,358 $ 224,358 Paid-in capital 1,304,645 1,304,645 Premium on preferred stock 99 99 Retained earnings 1,195,075 1,221,467 -------------- -------------- 2,724,177 2,750,569 Preferred stock 255,512 255,512 Company obligated mandatorily redeemable preferred securities of subsidiary trusts holding Company Junior Subordinated Notes 297,000 297,000 Long-term debt 2,543,526 2,473,202 -------------- -------------- Total 5,820,215 5,776,283 -------------- -------------- CURRENT LIABILITIES: Long-term debt due within one year 125,155 75,336 Commercial paper 259,015 306,882 Accounts payable-- Affiliated companies 58,088 79,822 Other 103,579 159,146 Customer deposits 34,789 34,968 Taxes accrued-- Federal and state income 62,878 21,177 Other 30,475 15,309 Interest accrued 39,835 50,722 Vacation pay accrued 28,783 28,783 Miscellaneous 93,211 103,602 -------------- -------------- Total 835,808 875,747 -------------- -------------- DEFERRED CREDITS AND OTHER LIABILITIES: Accumulated deferred income taxes 1,182,765 1,192,265 Accumulated deferred investment tax credits 280,075 282,873 Prepaid capacity revenues, net 106,615 109,982 Department of Energy Assessments 30,592 30,592 Deferred credits related to income taxes 334,489 327,328 Natural disaster reserve 22,950 22,416 Miscellaneous 203,569 195,381 -------------- -------------- Total 2,161,055 2,160,837 -------------- -------------- TOTAL CAPITALIZATION AND LIABILITIES $ 8,817,078 $ 8,812,867 ============== ============== The accompanying notes as they relate to ALABAMA are an integral part of these condensed statements.
19 ALABAMA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FIRST QUARTER 1998 vs. FIRST QUARTER 1997 RESULTS OF OPERATIONS Earnings ALABAMA's net income after dividends on preferred stock for the first quarter 1998 was $66.0 million compared to $57.8 million for the corresponding period of 1997. Earnings for this quarter increased 14.2% when compared to the same period in 1997 due to increased revenues. Significant income statement items appropriate for discussion include the following:
Increase (Decrease) -------------------------------------- (in thousands) % Revenues.......................................... $16,190 2.5 Revenues from affiliates.......................... (4,453) (9.5) Purchased power from non-affiliates............... 14,161 419.7 Maintenance....................................... (5,417) (7.9) Dividends on preferred stock...................... (2,370) (41.6)
Revenues. Excluding fuel revenues, which represent the pass-through of fuel expenses and do not affect net income, revenues for the first quarter increased $11.2 million compared to the corresponding period of 1997. The increase in first quarter revenues when compared to the same period of 1997 was due to a 4.5% increase in retail energy sales, primarily to residential customers. Energy sales to residential customers increased 7.5% due to relatively normal temperatures during the first quarter of 1998 as compared to temperatures that were much milder than normal during the first quarter of 1997. Revenues from affiliates. Revenues from sales to affiliated companies within the Southern electric system will vary from period to period depending on demand, the availability, and cost of generating resources at each company. These transactions did not have a significant impact on earnings. Purchased power from non-affiliates. The increase for the quarter compared to the corresponding period of 1997 resulted primarily from increased purchases related to power marketing activities, a majority of which were resold to non-affiliated third parties. These transactions had no significant effect on net income. Maintenance expense. The decrease during this quarter when compared to the same period in 1997 is attributable to lower nuclear maintenance expenses. 20 ALABAMA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Dividends on preferred stock. The decrease for the current quarter compared to the same period of 1997 resulted from redemptions of preferred stock during 1997. Future Earnings Potential The results of operations discussed above are not necessarily indicative of future earnings potential. The level of future earnings depends on numerous factors ranging from energy sales growth to a less regulated, more competitive environment. With the enactment of the Energy Act and new legislation being discussed at federal and state levels to expand customer choice, the Southern electric system is positioning the business to meet the challenge of increasing competition. For additional information, see Item 1 - BUSINESS - "Competition" and Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings Potential" of ALABAMA in the Form 10-K. Compliance costs related to the Clean Air Act could affect earnings if such costs cannot be offset. For additional information about the Clean Air Act and other environmental issues, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS "Environmental Matters" of ALABAMA in the Form 10-K. In March 1998, The American Institute of Certified Public Accountants issued a new Statement of Position (SOP), Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. The SOP, which must be adopted by 1999, requires capitalization of costs of internal-use software. Adoption of the SOP is not expected to have a material impact on the financial statements. Reference is made to Notes (B), (C), (F), (G), (H), (K) and (L) in the "Notes to the Condensed Financial Statements" herein for discussion of various contingencies and other matters which may affect future earnings potential. Reference is also made to Part II - Item 1 - "Legal Proceedings" herein. FINANCIAL CONDITION Overview Major changes in ALABAMA's financial condition during the first three months of 1998 included the addition of approximately $132.8 million to utility plant. The funds for these additions and other capital requirements were derived primarily from operating activities. See ALABAMA's Condensed Statements of Cash Flows for further details. Financing Activities During the first three months of 1998, redemptions and maturities of first mortgage bonds of ALABAMA totaled $74.3 million. In February 1998, ALABAMA issued $200.0 million of 7% senior notes due December 31, 2047. The proceeds were used to repay a portion of ALABAMA's short-term indebtedness. In April 1998, ALABAMA issued $190.0 million of 7% senior notes due March 31, 2048. The proceeds will be used to redeem $124.2 million of ALABAMA's First Mortgage Bonds, 8 3/4% Series due December 1, 2021 and to repay a portion of outstanding short-term indebtedness. 21 ALABAMA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION ALABAMA will continue to retire higher-cost debt and preferred stock and replace these securities with lower-cost capital as market conditions permit. Capital Requirements Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS of ALABAMA under "Capital Requirements," "Other Capital Requirements" and "Environmental Matters" in the Form 10-K for a description of ALABAMA's capital requirements for its construction program, maturing debt and environmental compliance efforts. Sources of Capital In addition to the financing activities previously described herein, ALABAMA plans to obtain the funds required for construction and other purposes from sources similar to those used in the past. The amount, type and timing of any financings--if needed--will depend upon maintenance of adequate earnings, regulatory approval, prevailing market conditions and other factors. See Item 1 - - BUSINESS - "Financing Programs" in the Form 10-K for additional information. To meet short-term cash needs and contingencies, ALABAMA had at March 31, 1998, approximately $18.7 million of cash and cash equivalents and had unused committed lines of credit of approximately $813.6 million (including $208.2 million of such lines under which borrowings may be made only to fund purchase obligations relating to variable rate pollution control bonds) with regulatory authority for up to $750 million of short-term borrowings. At March 31, 1998, ALABAMA had no outstanding short-term notes payable to banks and $259.0 million of commercial paper. 22 ARTHUR ANDERSEN LLP Exhibit 1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS TO ALABAMA POWER COMPANY: We have reviewed the accompanying condensed balance sheet of ALABAMA POWER COMPANY as of March 31, 1998, and the related condensed statements of income and cash flows for the three-month periods ended March 31, 1998 and 1997. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the balance sheet of ALABAMA POWER COMPANY as of December 31, 1997 (not presented herein) and, in our report dated February 11, 1998, we expressed an unqualified opinion on that statement. In our opinion, the information set forth in the accompanying condensed balance sheet as of December 31, 1997 is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived. /S/ Arthur Andersen LLP Birmingham, Alabama May 6, 1998 23 GEORGIA POWER COMPANY 24
GEORGIA POWER COMPANY CONDENSED STATEMENTS OF INCOME (UNAUDITED) (Stated in Thousands of Dollars) For the Three Months Ended March 31, 1998 1997 OPERATING REVENUES: Revenues $ 979,334 $ 951,453 Revenues from affiliates 4,809 7,259 -------------- -------------- Total operating revenues 984,143 958,712 -------------- -------------- OPERATING EXPENSES: Operation-- Fuel 176,631 178,629 Purchased power from non-affiliates 45,474 26,775 Purchased power from affiliates 43,685 41,371 Other 169,425 151,609 Maintenance 80,949 74,950 Depreciation and amortization 150,808 129,302 Amortization of deferred Plant Vogtle costs (Note N) 7,786 37,627 Taxes other than income taxes 52,195 53,931 Federal and state income taxes 80,649 84,649 -------------- -------------- Total operating expenses 807,602 778,843 -------------- -------------- OPERATING INCOME 176,541 179,869 OTHER INCOME (EXPENSE): Allowance for equity funds used during construction 178 542 Equity in earnings of unconsolidated subsidiary 1,082 980 Interest income 553 595 Other, net (5,123) (5,598) Income taxes applicable to other income 2,543 2,366 -------------- -------------- INCOME BEFORE INTEREST CHARGES 175,774 178,754 -------------- -------------- INTEREST CHARGES AND OTHER: Interest on long-term debt 45,056 48,455 Allowance for debt funds used during construction (1,828) (3,500) Interest on interim obligations 3,746 3,693 Amortization of debt discount, premium and expense, net 3,331 3,774 Other interest charges 4,014 2,924 Distributions on preferred securities of subsidiary companies 13,524 9,417 -------------- -------------- Interest charges and other, net 67,843 64,763 -------------- -------------- NET INCOME 107,931 113,991 DIVIDENDS ON PREFERRED STOCK 2,027 7,956 -------------- -------------- NET INCOME AFTER DIVIDENDS ON PREFERRED STOCK $ 105,904 $ 106,035 ============== ============== The accompanying notes as they relate to GEORGIA are an integral part of these condensed statements.
25
GEORGIA POWER COMPANY CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (Stated in Thousands of Dollars) For the Three Months Ended March 31, 1998 1997 OPERATING ACTIVITIES: Net income $ 107,931 $ 113,991 Adjustments to reconcile net income to net cash provided by operating activities-- Depreciation and amortization 177,698 155,377 Deferred income taxes, net (7,602) (13,553) Allowance for equity funds used during construction (178) (542) Amortization of deferred Plant Vogtle costs (Note N) 7,786 37,627 Other, net (1,726) 21,253 Changes in certain current assets and liabilities-- Receivables, net 49,944 83,646 Inventories (31,165) (3,784) Payables (64,623) (61,585) Taxes accrued 17,940 46,910 Energy cost recovery, retail 14,016 16,764 Other (15,862) (24,124) -------------- -------------- Net cash provided from operating activities 254,159 371,980 -------------- -------------- INVESTING ACTIVITIES: Gross property additions (80,276) (103,455) Other (42,479) (26,972) -------------- -------------- Net cash used for investing activities (122,755) (130,427) -------------- -------------- FINANCING ACTIVITIES: Proceeds-- Preferred securities - 175,000 Pollution control bonds 89,990 - Senior notes 145,000 - Retirements-- Preferred stock - (79,028) First mortgage bonds (120,460) (60,258) Special deposits - redemption funds (89,990) 44,454 Interim obligations, net (79,929) (168,658) Payment of preferred stock dividends (4,354) (7,679) Payment of common stock dividends (132,100) (122,700) Miscellaneous (4,507) (6,492) -------------- -------------- Net cash used for financing activities (196,350) (225,361) -------------- -------------- NET CHANGE IN CASH AND CASH EQUIVALENTS (64,946) 16,192 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 83,333 15,356 -------------- -------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 18,387 $ 31,548 ============== ============== SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for-- Interest (net of amount capitalized) $ 76,069 $ 72,031 Income taxes (net of refunds) 10,384 (7) The accompanying notes as they relate to GEORGIA are an integral part of these condensed statements.
26
GEORGIA POWER COMPANY CONDENSED BALANCE SHEETS (Stated in Thousands of Dollars) ASSETS At March 31, 1998 At December 31, (Unaudited) 1997 ---------------- ----------------- UTILITY PLANT: Plant in service $ 15,172,578 $ 15,082,570 Less accumulated provision for depreciation 5,483,343 5,319,680 ---------------- ---------------- 9,689,235 9,762,890 Nuclear fuel, at amortized cost 115,403 126,882 Construction work in progress 186,120 214,128 ---------------- ---------------- Total 9,990,758 10,103,900 ---------------- ---------------- OTHER PROPERTY AND INVESTMENTS: Southern Electric Generating Company, at equity 24,706 24,973 Nuclear decommissioning trusts, at market 238,559 194,417 Miscellaneous 79,366 87,907 ---------------- ---------------- Total 342,631 307,297 ---------------- ---------------- CURRENT ASSETS: Cash and cash equivalents 18,387 83,333 Receivables-- Customer accounts receivable 374,054 385,844 Other accounts and notes receivable 148,959 110,278 Affiliated companies 20,893 20,333 Accumulated provision for uncollectible accounts (3,000) (3,000) Fossil fuel stock, at average cost 126,856 96,067 Materials and supplies, at average cost 240,763 240,387 Prepayments 30,286 27,503 Vacation pay deferred 40,793 40,996 ---------------- ---------------- Total 997,991 1,001,741 ---------------- ---------------- DEFERRED CHARGES: Deferred charges related to income taxes 674,674 688,472 Deferred Plant Vogtle costs (Note N) 42,626 50,412 Premium on reacquired debt, being amortized 164,450 166,609 Prepaid pension costs 76,012 67,777 Debt expense, being amortized 45,291 40,927 Miscellaneous 143,529 146,593 ---------------- ---------------- Total 1,146,582 1,160,790 ---------------- ---------------- TOTAL ASSETS $ 12,477,962 $ 12,573,728 ================ ================ The accompanying notes as they relate to GEORGIA are an integral part of these condensed statements.
27
GEORGIA POWER COMPANY CONDENSED BALANCE SHEETS (Stated in Thousands of Dollars) CAPITALIZATION AND LIABILITIES At March 31, 1998 At December 31, (Unaudited) 1997 ---------------- ----------------- CAPITALIZATION: Common stock equity-- Common stock (without par value)-- authorized 15,000,000 shares; outstanding 7,761,500 shares $ 344,250 $ 344,250 Paid-in capital 1,929,971 1,929,971 Premium on preferred stock 160 160 Retained earnings 1,719,751 1,745,347 ---------------- ---------------- 3,994,132 4,019,728 Preferred stock 116,568 157,247 Company obligated mandatorily redeemable preferred securities of subsidiaries substantially all of whose assets are junior subordinated debentures or notes 689,250 689,250 Long-term debt 3,128,182 2,982,835 ---------------- ---------------- Total 7,928,132 7,849,060 ---------------- ---------------- CURRENT LIABILITIES: Preferred stock due within one year 40,679 - Long-term debt due within one year 190,394 220,855 Notes payable to banks 72,800 142,300 Commercial paper 213,501 223,930 Accounts payable-- Affiliated companies 48,962 71,373 Other 184,180 261,293 Customer deposits 68,187 68,618 Taxes accrued-- Federal and state income 79,805 4,480 Other 54,157 111,541 Interest accrued 60,880 72,437 Miscellaneous 112,586 105,683 ---------------- ---------------- Total 1,126,131 1,282,510 ---------------- ---------------- DEFERRED CREDITS AND OTHER LIABILITIES: Accumulated deferred income taxes 2,403,866 2,417,547 Accumulated deferred investment tax credits 393,497 397,202 Deferred credits related to income taxes 293,333 297,560 Employee benefits provisions 174,382 169,887 Miscellaneous 158,621 159,962 ---------------- ---------------- Total 3,423,699 3,442,158 ---------------- ---------------- TOTAL CAPITALIZATION AND LIABILITIES $ 12,477,962 $ 12,573,728 ================ ================ The accompanying notes as they relate to GEORGIA are an integral part of these condensed statements.
28 GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FIRST QUARTER 1998 vs. FIRST QUARTER 1997 RESULTS OF OPERATIONS Earnings GEORGIA's net income after dividends on preferred stock for the first quarter 1998 was $105.9 million, essentially unchanged from $106.0 million for the same period in 1997. Significant income statement items appropriate for discussion include the following:
Increase (Decrease) -------------------------------------- (in thousands) % Revenues.......................................... $27,881 2.9 Revenues from affiliates.......................... (2,450) (33.8) Purchased power from non-affiliates............... 18,699 69.8 Purchased power from affiliates................... 2,314 5.6 Other operation expense........................... 17,816 11.8 Maintenance....................................... 5,999 8.0 Depreciation and amortization expense............. 21,506 16.6 Amortization of deferred Plant Vogtle costs....... (29,841) (79.3) Interest on long-term debt........................ (3,399) (7.0) Distributions on preferred securities of subsidiary companies........................ 4,107 43.6 Dividends on preferred stock...................... (5,929) (74.5)
Revenues. Excluding fuel and demand-side program revenues, which represent the pass-through of fuel and demand-side program expenses and generally do not affect income, revenues for the first quarter of 1998 increased $16.7 million compared to the corresponding period of 1997. Retail revenues, excluding fuel and demand-side program revenues, increased 3.5%, or $23.1 million for the current quarter as compared to the corresponding period of 1997 primarily due to a 5.0% increase in retail energy sales. Energy sales increased by 10.2%, 5.2% and 1.8% to residential, commercial and industrial customers, respectively, due primarily to milder-than-normal weather in the first quarter of 1997. Wholesale revenues, excluding fuel revenues, decreased $7.7 million compared to the corresponding period of 1997 primarily due to a decrease in capacity revenues under a power supply agreement with OPC. Revenues from affiliates and Purchased power from affiliates. Revenues from sales to affiliated companies within the Southern electric system, as well as purchases of energy, will vary from period to period depending on demand and the availability and cost of generating resources at each company. These transactions do not have a significant impact on earnings. 29 GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Purchased power from non-affiliates. The increase for the current quarter is primarily due to an increase in energy purchases related to power marketing activities, a majority of which were resold to non-affiliated third parties. These transactions had no significant effect on net income. Other operation expense. The increase for the quarter was primarily due to higher expenses associated with a new customer service system implemented in January 1998, and modification of certain information systems for year 2000 compliance. For additional information on the year 2000 issue, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS "Future Earnings Potential" of GEORGIA in the Form 10-K. Maintenance expense. The increase in the current quarter from the corresponding period of 1997 is primarily due to higher costs associated with steam plant and transmission and distribution line maintenance. Depreciation and amortization expense. The increase in depreciation and amortization for the current quarter compared to the same period of 1997 is primarily due to an increase in additional depreciation charges of $12.2 million, pursuant to a Georgia PSC retail accounting order discussed below, and an increase in plant-in-service. See "Future Earnings Potential" below and Note (M) in the "Notes to the Condensed Financial Statements" herein for further details regarding the retail accounting order. Amortization of deferred Plant Vogtle costs. The costs decreased for the quarter due to the completion in September 1997 of the amortization of levelized buybacks and Plant Vogtle Unit 1 cost deferrals under the 1987 Georgia PSC order. See Note (N) in the "Notes to the Condensed Financial Statements", herein for further details. Interest on long-term debt and Dividends on preferred stock. The decreases in these items for the current quarter result from the refinancing of long-term debt and redemption of various issues of such securities. Distributions on preferred securities of subsidiary companies. The increase in this item resulted primarily from the issuance of additional mandatorily redeemable preferred securities in June 1997. For additional information, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Financing Activities" of GEORGIA in the Form 10-K. Future Earnings Potential The results of operations discussed above are not necessarily indicative of future earnings potential. The level of future earnings depends on numerous factors including regulatory matters and energy sales. With the enactment of the Energy Act and new legislation being discussed at federal and state levels to expand customer choice, the Southern electric system is positioning the business to meet the challenge of increasing competition. For additional information, see Item 1 - BUSINESS - "Competition" and Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings Potential" of GEORGIA in the Form 10-K. 30 GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Effective January 1, 1996, GEORGIA began operating under a three-year retail accounting order. Under the order, GEORGIA's earnings are evaluated against a retail return on common equity range of 10% to 12.5%. GEORGIA is required to absorb cost increases of approximately $29.0 million annually during the order's three-year operation, including $14.0 million annually of accelerated depreciation of electric plant. Reference is made to Note (M) in the "Notes to the Condensed Financial Statements" herein for additional information. On January 14, 1998, the Georgia PSC ordered that GEORGIA be allowed approximately $108 million of its $143 million investment in the Rocky Mountain pumped storage hydroelectric plant in rate base as of December 31, 1998. Reference is made to Note (O) in the "Notes to the Condensed Financial Statements" herein for additional information. Compliance costs related to the Clean Air Act could affect earnings if such costs cannot be offset. For additional information about the Clean Air Act and other environmental issues, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS "Environmental Issues" of GEORGIA in the Form 10-K. In March 1998, The American Institute of Certified Public Accountants issued a new Statement of Position (SOP), Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. The SOP, which must be adopted by 1999, requires capitalization of costs of internal-use software. Adoption of the SOP is not expected to have a material impact on the financial statements. Reference is made to Notes (B), (C), (F), (H) and (M) through (P) in the "Notes to the Condensed Financial Statements" herein for discussion of various contingencies and other matters which may affect future earnings potential. FINANCIAL CONDITION Overview The major change in GEORGIA's financial condition during the first three months of 1998 was the addition of approximately $80.3 million to gross plant. The funds for these additions and other capital requirements were derived primarily from operations. See GEORGIA's Condensed Statements of Cash Flows for further details. Financing Activities During the first three months of 1998, redemptions of first mortgage bonds by GEORGIA totaled $120.5 million. In January 1998, GEORGIA issued $145.0 million of 6 7/8% senior notes due December 31, 2047. The proceeds from this issuance were used to repay a portion of GEORGIA's outstanding short-term indebtedness. In March 1998, GEORGIA sold, through public authorities, $89.99 million aggregate principal amount of variable rate pollution control revenue bonds with $72.99 million aggregate principal amount due in 2024 and $17.0 million aggregate principal amount due in 2025. The proceeds were used in April 1998 to redeem $4.1 million aggregate principal amount of 6.20% pollution control revenue bonds; $22.1 million aggregate principal amount of 6.00% pollution control revenue bonds; $17.0 million aggregate principal amount of 5.90% pollution control revenue bonds; and $46.79 million aggregate principal amount of 5 3/8% pollution control revenue bonds. 31 GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION GEORGIA has announced the planned redemption of $40.7 million of preferred stock in June 1998. GEORGIA plans to continue, to the extent possible, a program to retire higher-cost debt and preferred stock and replace these securities with lower-cost capital. Capital Requirements Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS of GEORGIA under "Liquidity and Capital Requirements" and "Environmental Issues" in the Form 10-K for a description of GEORGIA's capital requirements for its construction program and environmental compliance efforts. Sources of Capital In addition to the financing activities previously described herein, GEORGIA plans to obtain the funds required for construction and other purposes from sources similar to those used in the past. The amount, type and timing of any financings--if needed--will depend upon maintenance of adequate earnings, regulatory approval, prevailing market conditions and other factors. See Item 1 - - BUSINESS - "Financing Programs" in the Form 10-K for additional information. To meet short-term cash needs and contingencies, GEORGIA had at March 31, 1998, approximately $18.4 million of cash and cash equivalents and approximately $1.1 billion of unused credit arrangements with banks (including $879 million of such arrangements under which borrowings may be made only to fund purchase obligations relating to variable rate pollution control bonds). At March 31, 1998, GEORGIA had $286.3 million outstanding in short-term notes payable to banks or commercial paper. Since GEORGIA has no major generating plants under construction, management believes that the need for working capital can be adequately met by utilizing lines of credit without maintaining large cash balances. 32 ARTHUR ANDERSEN LLP Exhibit 1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS TO GEORGIA POWER COMPANY: We have reviewed the accompanying condensed balance sheet of GEORGIA POWER COMPANY (a Georgia corporation) as of March 31, 1998, and the related condensed statements of income and cash flows for the three-month periods ended March 31, 1998 and 1997. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the balance sheet of GEORGIA POWER COMPANY as of December 31, 1997 (not presented herein), and, in our report dated February 11, 1998, we expressed an unqualified opinion on that statement. In our opinion, the information set forth in the accompanying condensed balance sheet as of December 31, 1997, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived. /s/ Arthur Andersen LLP Atlanta, Georgia May 8, 1998 33 GULF POWER COMPANY 34
GULF POWER COMPANY CONDENSED STATEMENTS OF INCOME (UNAUDITED) (Stated in Thousands of Dollars) For the Three Months Ended March 31, 1998 1997 OPERATING REVENUES: Revenues $ 134,553 $ 140,204 Revenues from affiliates 6,397 1,170 ------------- ------------ Total operating revenues 140,950 141,374 ------------- ------------ OPERATING EXPENSES: Operation-- Fuel 41,443 36,992 Purchased power from non-affiliates 4,733 1,096 Purchased power from affiliates 3,888 8,863 Other 31,281 30,620 Maintenance 12,896 9,510 Depreciation and amortization 14,703 14,446 Taxes other than income taxes 12,619 12,775 Federal and state income taxes 4,150 6,860 ------------- ------------ Total operating expenses 125,713 121,162 ------------- ------------ OPERATING INCOME 15,237 20,212 OTHER INCOME (EXPENSE): Allowance for equity funds used during construction - 1 Interest income 123 329 Other, net (1,203) (254) Income taxes applicable to other income 357 (77) ------------- ------------ INCOME BEFORE INTEREST CHARGES 14,514 20,211 ------------- ------------ INTEREST CHARGES AND OTHER: Interest on long-term debt 4,877 5,797 Other interest charges 275 716 Interest on notes payable 338 283 Amortization of debt discount, premium, and expense, net 578 566 Allowance for debt funds used during construction - (3) Distributions on preferred securities of subsidiary companies 1,384 517 ------------- ------------ Interest charges and other, net 7,452 7,876 ------------- ------------ NET INCOME 7,062 12,335 DIVIDENDS ON PREFERRED STOCK 209 1,595 ------------- ------------ NET INCOME AFTER DIVIDENDS ON PREFERRED STOCK $ 6,853 $ 10,740 ============= ============ The accompanying notes as they relate to GULF are an integral part of these condensed statements.
35
GULF POWER COMPANY CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (Stated in Thousands of Dollars) For the Three Months Ended March 31, 1998 1997 OPERATING ACTIVITIES: Net income $ 7,062 $ 12,335 Adjustments to reconcile net income to net cash provided by operating activities-- Depreciation and amortization 18,518 17,857 Deferred income taxes (1,918) (983) Deferred costs of 1995 coal contract renegotiation - 1,246 Other, net (1,051) 180 Changes in certain current assets and liabilities-- Receivables, net 15,544 11,985 Inventories (6,011) (3,522) Payables (12,499) (3,413) Taxes accrued 3,431 6,333 Current costs of 1995 coal contract renegotiation 812 4,121 Other (5,412) (7,070) ------------- ----------- Net cash provided from operating activities 18,476 39,069 -------------- ------------ INVESTING ACTIVITIES: Gross property additions (11,148) (11,072) Other (1,974) (1,146) ------------- ----------- Net cash used for investing activities (13,122) (12,218) -------------- ------------ FINANCING ACTIVITIES: Proceeds-- Preferred securities 45,000 40,000 Retirements-- Preferred stock - (24,500) Other long-term debt (5,754) (5,456) Notes payable, net (20,500) (7,500) Payment of preferred stock dividends (210) (2,058) Payment of common stock dividends (24,100) (22,900) Miscellaneous (2,373) (1,519) ------------- ----------- Net cash used for financing activities (7,937) (23,933) -------------- ------------ NET CHANGE IN CASH AND CASH EQUIVALENTS (2,583) 2,918 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,707 807 -------------- ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,124 $ 3,725 ============== ============ SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for-- Interest (net of amount capitalized) $ 6,997 $ 6,132 Income taxes 716 3 The accompanying notes as they relate to GULF are an integral part of these condensed statements.
36
GULF POWER COMPANY CONDENSED BALANCE SHEETS (Stated in Thousands of Dollars) ASSETS At March 31, 1998 At December 31, (Unaudited) 1997 -------------- ---------------- UTILITY PLANT: Plant in service $ 1,767,504 $ 1,762,244 Less accumulated provision for depreciation 749,938 737,767 -------------- -------------- 1,017,566 1,024,477 Construction work in progress 33,436 31,030 -------------- -------------- Total 1,051,002 1,055,507 -------------- -------------- OTHER PROPERTY AND INVESTMENTS: 621 622 -------------- -------------- CURRENT ASSETS: Cash and cash equivalents 2,124 4,707 Receivables-- Customer accounts receivable 53,794 63,691 Other accounts and notes receivable 2,115 2,744 Affiliated companies 2,311 7,329 Accumulated provision for uncollectible accounts (795) (796) Fossil fuel stock, at average cost 25,536 19,296 Materials and supplies, at average cost 28,405 28,634 Current portion of deferred coal contract costs - 4,456 Regulatory clauses under recovery 1,675 1,675 Other prepayments 1,956 2,171 Vacation pay deferred 4,057 4,057 -------------- -------------- Total 121,178 137,964 -------------- -------------- DEFERRED CHARGES: Deferred charges related to income taxes 26,596 26,586 Debt expense and loss, being amortized 22,515 22,941 Prepaid pension costs 11,135 10,385 Deferred storm charges - 703 Miscellaneous 11,470 10,904 -------------- -------------- Total 71,716 71,519 -------------- -------------- TOTAL ASSETS $ 1,244,517 $ 1,265,612 ============== ============== The accompanying notes as they relate to GULF are an integral part of these condensed statements.
37
GULF POWER COMPANY CONDENSED BALANCE SHEETS (Stated in Thousands of Dollars) CAPITALIZATION AND LIABILITIES At March 31, 1998 At December 31, (Unaudited) 1997 -------------- ---------------- CAPITALIZATION: Common stock equity-- Common stock (without par value)-- authorized and outstanding--992,717 shares $ 38,060 $ 38,060 Paid-in capital 218,438 218,438 Premium on preferred stock 12 12 Retained earnings 164,062 172,208 -------------- -------------- 420,572 428,718 Preferred stock 13,686 13,691 Company obligated mandatorily redeemable preferred securities of subsidiary trusts holding Company Junior Subordinated Notes (Note J) 85,000 40,000 Long-term debt 295,670 296,993 -------------- -------------- Total 814,928 779,402 -------------- -------------- CURRENT LIABILITIES: Preferred stock due within one year 5 - Long-term debt due within one year 47,572 53,327 Notes payable 26,500 47,000 Accounts payable-- Affiliated companies 5,131 14,334 Other 15,466 20,205 Customer deposits 13,796 13,778 Taxes accrued-- Federal and state income 3,584 - Other 6,693 8,258 Interest accrued 6,805 7,227 Regulatory clauses over recovery 4,490 5,062 Vacation pay accrued 4,057 4,057 Dividends declared 209 10,210 Miscellaneous 1,311 8,739 -------------- -------------- Total 135,619 192,197 -------------- -------------- DEFERRED CREDITS AND OTHER LIABILITIES: Accumulated deferred income taxes 165,668 166,302 Deferred credits related to income taxes 56,207 56,935 Accumulated provision for property damage 181 - Accumulated deferred investment tax credits 31,002 31,552 Accumulated provision for postretirement benefits 21,290 20,491 Miscellaneous 19,622 18,733 -------------- -------------- Total 293,970 294,013 -------------- -------------- TOTAL CAPITALIZATION AND LIABILITIES $ 1,244,517 $ 1,265,612 ============== ============== The accompanying notes as they relate to GULF are an integral part of these condensed statements.
38 GULF POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FIRST QUARTER 1998 vs. FIRST QUARTER 1997 RESULTS OF OPERATIONS Earnings GULF's net income after dividends on preferred stock for the first quarter 1998 was $6.9 million compared to $10.7 million for the corresponding period of 1997. Earnings for the quarter decreased due primarily to an increase in operating expenses. Significant income statement items appropriate for discussion include the following:
Increase (Decrease) -------------------------------------- (in thousands) % Revenues.......................................... $(5,651) (4.0) Revenues from affiliates.......................... 5,227 446.8 Fuel expense...................................... 4,451 12.0 Purchased power from non-affiliates............... 3,637 331.8 Purchased power from affiliates................... (4,975) (56.1) Maintenance....................................... 3,386 35.6 Distributions on preferred securities of subsidiary companies........................ 867 167.7 Dividends on preferred stock...................... (1,386) (86.9)
Revenues. Excluding a decrease in fuel and other revenues of $6.1 million, which represent the pass-through of fuel expense and certain other expenses and do not affect net income, revenues increased $0.5 million or 0.6% for the first quarter compared to the corresponding period of 1997. Retail revenues decreased 3.0% for the first quarter compared to the same period of 1997 despite a 2.5% increase in retail energy sales. Energy sales to residential and commercial customers were up 6.1% and 1.6%, respectively, while energy sales to industrial customers were down 3.9%. Revenues associated with residential customers were up 2.2% for this first quarter and down for such period 3.8% and 20.0% for commercial and industrial customers, respectively. The decrease in revenues from the commercial and industrial sectors is primarily due to the increased participation of these customers in the Real-Time Pricing Program. See Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings Potential" of GULF in the Form 10-K for information on initiatives to remain competitive and to meet conservation goals set by the Florida PSC. Revenues from affiliates and Purchased power from affiliates. Revenues from sales to affiliated companies within the Southern electric system, as well as purchases of energy, will vary from period to period depending on demand and the availability and cost of generating resources at each company. These transactions do not have a significant impact on earnings. 39 GULF POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Fuel expense. The increase in fuel expense compared to the corresponding period in 1997 can be attributed to increased generation as a result of higher energy sales during the first quarter. Purchased power from non-affiliates. The increase in purchased power from non-affiliates compared to the corresponding period in 1997 can primarily be attributed to an increase in energy purchases related to increased power marketing activities, a majority of which were resold to non-affiliated third parties. These transactions had no significant effect on net income. Maintenance expense. The increase in maintenance expense compared to the corresponding period in 1997 is primarily due to scheduled maintenance performed on production facilities at Plant Crist and Plant Smith during the first quarter of 1998. Distributions on preferred securities of subsidiary companies. See "Financing Activities" herein for details relating to the January 1998 issuance by Gulf Power Capital Trust II of its 7.00% trust preferred securities. Dividends on preferred stock. Current quarter preferred stock dividends decreased when compared to the same period in 1997 due to the redemptions of preferred stock during 1997. Future Earnings Potential The results of operations discussed above are not necessarily indicative of future earnings potential. The level of future earnings depends on numerous factors ranging from energy sales growth to a less regulated, more competitive environment. With the enactment of the Energy Act and new legislation being discussed at federal and state levels to expand customer choice, the Southern electric system is positioning the business to meet the challenge of increasing competition. For additional information, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings Potential" of GULF and Item 1 - BUSINESS - "Competition" in the Form 10-K. Compliance costs related to the Clean Air Act could affect earnings if such costs are not fully recovered through GULF's Environmental Cost Recovery Clause. For additional information about the Clean Air Act and other environmental issues, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Environmental Matters" of GULF in the Form 10-K. In March 1998, The American Institute of Certified Public Accountants issued a new Statement of Position (SOP), Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. The SOP, which must be adopted by 1999, requires capitalization of costs of internal-use software. Adoption of the SOP is not expected to have a material impact on the financial statements. Reference is made to Notes (B) and (F) in the "Notes to the Condensed Financial Statements" herein for discussion of various contingencies and other matters which may affect future earnings potential. 40 GULF POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FINANCIAL CONDITION Overview Major changes in GULF's financial condition during the first three months of 1998 included the addition of approximately $11.1 million to utility plant. The funds for these additions and other capital requirements were derived primarily from operations. See GULF's Condensed Statements of Cash Flows for further details. Financing Activities During the first quarter of 1998, Gulf Power Capital Trust II, a statutory business trust established for the purpose of holding GULF's junior subordinated notes and issuing trust preferred securities and common securities, sold $45 million of its 7.00% trust preferred securities which are guaranteed by GULF. For additional information, see Note (J) in the "Notes to the Condensed Financial Statements" and Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Sources of Capital" of GULF in the Form 10-K. The proceeds were used to redeem $36.4 million of cumulative preferred stock and to repay short-term indebtedness. GULF plans to continue, to the extent possible, a program to retire higher-cost debt and preferred stock and replace these securities with lower-cost capital. Capital Requirements Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS of GULF under "Capital Requirements for Construction," "Environmental Matters" and "Other Capital Requirements" in the Form 10-K for a description of GULF's capital requirements for its construction program, environmental compliance efforts and maturing debt. Sources of Capital In addition to the financing activities previously described herein, GULF plans to obtain the funds required for construction and other purposes from sources similar to those used in the past. The amount, type and timing of any financings--if needed--will depend upon maintenance of adequate earnings, regulatory approval, prevailing market conditions and other factors. See Item 1 - - BUSINESS - "Financing Programs" in the Form 10-K for additional information. To meet short-term cash needs and contingencies, GULF had at March 31, 1998, approximately $2.1 million of cash and cash equivalents and $36.0 million of unused committed lines of credit with banks in addition to $61.9 million liquidity support for variable rate pollution control bonds. At March 31, 1998, GULF had $26.5 million of short-term notes payable to banks. Since GULF has no major generating plants under construction, management believes that the need for working capital can be adequately met by utilizing lines of credit without maintaining large cash balances. 41 MISSISSIPPI POWER COMPANY 42
MISSISSIPPI POWER COMPANY CONDENSED STATEMENTS OF INCOME (UNAUDITED) (Stated in Thousands of Dollars) For the Three Months Ended March 31, 1998 1997 OPERATING REVENUES: Revenues $ 121,281 $ 117,789 Revenues from affiliates 875 (886) ------------ ------------- Total operating revenues 122,156 116,903 ------------ ------------- OPERATING EXPENSES: Operation-- Fuel 27,288 29,541 Purchased power from non-affiliates 4,300 484 Purchased power from affiliates 11,296 10,515 Other 23,846 20,824 Maintenance 11,394 9,612 Depreciation and amortization 11,653 11,194 Taxes other than income taxes 12,080 10,897 Federal and state income taxes 4,932 6,704 ------------ ------------- Total operating expenses 106,789 99,771 ------------ ------------- OPERATING INCOME 15,367 17,132 OTHER INCOME (EXPENSE): Allowance for equity funds used during construction - 4 Interest income 50 141 Other, net 233 654 Income taxes applicable to other income (313) (329) ------------ ------------- INCOME BEFORE INTEREST CHARGES 15,337 17,602 ------------ ------------- INTEREST CHARGES AND OTHER: Interest on long-term debt 4,798 4,895 Allowance for debt funds used during construction - (8) Interest on notes payable 428 47 Amortization of debt discount, premium, and expense, net 388 387 Other interest charges 141 139 Distributions on preferred securities of subsidiary companies 699 272 ------------ ------------- Interest charges and other, net 6,454 5,732 ------------ ------------- NET INCOME 8,883 11,870 DIVIDENDS ON PREFERRED STOCK 495 1,225 ------------ ------------- NET INCOME AFTER DIVIDENDS ON PREFERRED STOCK $ 8,388 $ 10,645 ============ ============= The accompanying notes as they relate to MISSISSIPPI are an integral part of these condensed statements.
43
MISSISSIPPI POWER COMPANY CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (Stated in Thousands of Dollars) For the Three Months Ended March 31, 1998 1997 OPERATING ACTIVITIES: Net income $ 8,883 $ 11,870 Adjustments to reconcile net income to net cash provided by (used for) operating activities-- Depreciation and amortization 12,680 12,263 Deferred income taxes 72 884 Allowance for equity funds used during construction - (4) Other, net (492) (1,821) Changes in certain current assets and liabilities-- Receivables, net 3,604 10,073 Inventories (5,457) (2,300) Payables (5,732) (12,277) Taxes accrued (16,612) (16,094) Other (2,537) (1,662) ------------ ------------ Net cash provided from (used for) operating activities (5,591) 932 ------------ ------------ INVESTING ACTIVITIES: Gross property additions (12,886) (11,437) Other (4,933) (2,286) ------------ ------------ Net cash used for investing activities (17,819) (13,723) ------------ ------------ FINANCING ACTIVITIES: Proceeds-- Preferred securities - 35,000 Retirements-- Preferred stock (87) - First mortgage bonds (35,000) - Notes payable, net 69,000 - Payment of preferred stock dividends (495) (1,225) Payment of common stock dividends (12,700) (11,300) Miscellaneous (16) - ------------ ------------ Net cash provided from financing activities 20,702 22,475 ------------ ------------ NET CHANGE IN CASH AND CASH EQUIVALENTS (2,708) 9,684 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,432 7,058 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,724 $ 16,742 ============ ============ SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for-- Interest (net of amount capitalized) $ 4,509 $ 4,833 Income taxes (534) 390 The accompanying notes as they relate to MISSISSIPPI are an integral part of these condensed statements.
44
MISSISSIPPI POWER COMPANY CONDENSED BALANCE SHEETS (Stated in Thousands of Dollars) ASSETS At March 31, 1998 At December 31, (Unaudited) 1997 -------------- ---------------- UTILITY PLANT: Plant in service, at original cost $ 1,526,660 $ 1,518,402 Less accumulated provision for depreciation 567,998 559,098 -------------- -------------- 958,662 959,304 Construction work in progress 43,195 41,083 -------------- -------------- Total 1,001,857 1,000,387 -------------- -------------- OTHER PROPERTY AND INVESTMENTS: 650 650 -------------- -------------- CURRENT ASSETS: Cash and cash equivalents 1,724 4,432 Receivables-- Customer accounts receivable 25,843 32,220 Regulatory clauses under recovery 8,646 7,619 Other accounts and notes receivable 8,089 8,666 Affiliated companies 9,685 7,398 Accumulated provision for uncollectible accounts (662) (698) Fossil fuel stock, at average cost 15,776 10,651 Materials and supplies, at average cost 19,784 19,452 Current portion of accumulated deferred income taxes 8,410 8,379 Prepayments 4,552 1,791 Vacation pay deferred 5,030 5,030 -------------- -------------- Total 106,877 104,940 -------------- -------------- DEFERRED CHARGES: Debt expense and loss, being amortized 11,931 12,234 Deferred charges related to income taxes 22,185 21,906 Long-term notes receivable 2,583 2,837 Work force reduction plan 18,236 18,236 Miscellaneous 4,963 5,639 -------------- -------------- Total 59,898 60,852 -------------- -------------- TOTAL ASSETS $ 1,169,282 $ 1,166,829 ============== ============== The accompanying notes as they relate to MISSISSIPPI are an integral part of these condensed statements.
45
MISSISSIPPI POWER COMPANY CONDENSED BALANCE SHEETS (Stated in Thousands of Dollars) CAPITALIZATION AND LIABILITIES At March 31, 1998 At December 31, (Unaudited) 1997 -------------- ---------------- CAPITALIZATION: Common stock equity-- Common stock (without par value)-- authorized 1,130,000 shares; outstanding 1,121,000 shares $ 37,691 $ 37,691 Paid-in capital 179,389 179,389 Premium on preferred stock 326 327 Retained earnings 166,105 170,417 -------------- -------------- 383,511 387,824 Preferred stock 31,809 31,896 Company obligated mandatorily redeemable preferred securities of subsidiary trust holding Company Junior Subordinated Notes 35,000 35,000 Long-term debt 291,735 291,665 -------------- -------------- Total 742,055 746,385 -------------- -------------- CURRENT LIABILITIES: Long-term debt due within one year 20 35,020 Notes payable 69,000 - Accounts payable-- Affiliated companies 11,128 8,548 Regulatory clauses over recovery 16,364 15,476 Other 21,003 34,065 Customer deposits 3,281 3,225 Taxes accrued-- Federal and state income 6,761 1,101 Other 11,587 33,859 Interest accrued 4,323 4,098 Miscellaneous 12,737 12,797 -------------- -------------- Total 156,204 148,189 -------------- -------------- DEFERRED CREDITS AND OTHER LIABILITIES: Accumulated deferred income taxes 135,233 134,645 Accumulated deferred investment tax credits 26,819 27,121 Deferred credits related to income taxes 38,209 38,203 Postretirement benefits 25,301 25,145 Accumulated provision for property damage 14,366 13,991 Work force reduction plan 14,380 15,700 Miscellaneous 16,715 17,450 -------------- -------------- Total 271,023 272,255 -------------- -------------- TOTAL CAPITALIZATION AND LIABILITIES $ 1,169,282 $ 1,166,829 ============== ============== The accompanying notes as they relate to MISSISSIPPI are an integral part of these condensed statements.
46 MISSISSIPPI POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FIRST QUARTER 1998 vs. FIRST QUARTER 1997 RESULTS OF OPERATIONS Earnings MISSISSIPPI's net income after dividends on preferred stock for the first quarter 1998 was $8.4 million compared to $10.6 million for the corresponding period of 1997. Earnings for the current quarter decreased by 21.2% primarily as a result of increased operating expenses. Significant income statement items appropriate for discussion include the following:
Increase (Decrease) -------------------------------------- (in thousands) % Revenues.......................................... $3,492 3.0 Revenues from affiliates.......................... 1,761 N/M Fuel expense...................................... (2,253) (7.6) Purchased power from non-affiliates............... 3,816 N/M Other operation expense........................... 3,022 14.5 Maintenance expense............................... 1,782 18.5
Revenues. The increase in revenues was due primarily to an increase of $2.8 million in non-territorial wholesale energy sales. Retail revenues, excluding those revenues which represent the recovery of fuel expense and certain other expenses and do not affect income, decreased $0.4 million for the quarter due to decreased energy sales during this period as compared to 1997. First quarter revenues from territorial wholesale customers, excluding fuel revenues which do not affect income, increased $0.7 million compared to the same period of 1997, with an increase in energy sales of 3.0%. Revenues from affiliates. Revenues from sales to affiliated companies within the Southern electric system will vary from period to period depending on demand and the availability and cost of generating resources at each company. The change in the first quarter 1998 when compared to the same period in 1997 reflect adjustments to affiliated billings in first quarter of 1997. These transactions do not have a significant impact on earnings. Fuel expense. The decrease in fuel expense was due to decreased generation when compared to the same period in 1997. Purchased power from non-affiliates. The increase in purchased power from non-affiliates can be attributed to off-system energy purchases primarily resold to non-affiliated third parties. These transactions had no significant effect on net income. Other operation expense. The current quarter increase in other operation expense was primarily due to higher administrative and general expenses. 47 MISSISSIPPI POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Maintenance expense. The increase for the current quarter compared to the same period in 1997 is due to a scheduled outage at Plant Watson Unit 5 and higher distribution line expenses. Future Earnings Potential The results of operations discussed above are not necessarily indicative of future earnings potential. The level of future earnings depends on numerous factors ranging from energy sales growth to a less regulated, more competitive environment. Operating revenues will be affected by any changes in rates under the PEP and ECO plans. The PEP has proven to be a stabilizing force on electric rates, with only moderate changes in rates taking place. With the enactment of the Energy Act and new legislation being discussed at federal and state levels to expand customer choice, the Southern electric system is positioning the business to meet the challenge of increasing competition. For additional information, see Item 1 - BUSINESS - "Competition" and Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings Potential" of MISSISSIPPI in the Form 10-K. Compliance costs related to the Clean Air Act could affect earnings if such costs cannot be recovered. MISSISSIPPI's 1998 ECO Plan filing was approved, as filed, by the Mississippi PSC on March 17, 1998 and resulted in a small decrease in customer prices. For additional information about the Clean Air Act and other environmental issues, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Environmental Matters" of MISSISSIPPI in the Form 10-K. In March 1998, The American Institute of Certified Public Accountants issued a new Statement of Position (SOP), Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. The SOP, which must be adopted by 1999, requires capitalization of costs of internal-use software. Adoption of the SOP is not expected to have a material impact on the financial statements. Reference is made to Notes (B), (F) and (G) in the "Notes to the Condensed Financial Statements" herein for discussion of various contingencies and other matters which may affect future earnings potential. FINANCIAL CONDITION Overview Major changes in MISSISSIPPI's financial condition during the first three months of 1998 included the addition of approximately $12.9 million to utility plant. The funds for these additions and other capital requirements were derived primarily from operations. See MISSISSIPPI's Condensed Statements of Cash Flows for further details. 48 MISSISSIPPI POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Financing Activities In May 1998, MISSISSIPPI sold through public authorities, $13.52 million of variable rate pollution control revenue refunding bonds due May 1, 2028. The proceeds will be used to redeem $13.0 million of the 6.20% Series pollution control revenue bonds and to pay certain costs of issuance. For additional information, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Sources of Capital" of MISSISSIPPI in the Form 10-K. MISSISSIPPI plans to continue, to the extent possible, a program to retire higher-cost debt and preferred stock and replace these securities with lower-cost capital. Capital Requirements Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS of MISSISSIPPI under "Capital Requirements for Construction," "Environmental Matters" and "Other Capital Requirements" in the Form 10-K for a description of MISSISSIPPI's capital requirements for its construction program, environmental compliance efforts, sinking fund requirements and maturities of long-term debt. Sources of Capital In addition to the financing activities previously described herein, MISSISSIPPI plans to obtain the funds required for construction and other purposes from sources similar to those used in the past. The amount, type and timing of any financings--if needed--will depend upon maintenance of adequate earnings, regulatory approval, prevailing market conditions and other factors. See Item 1 - - BUSINESS - "Financing Programs" in the Form 10-K for additional information. To meet short-term cash needs and contingencies, MISSISSIPPI had at March 31, 1997, approximately $1.7 million of cash and cash equivalents and approximately $76.3 million of unused committed credit arrangements with banks (including $10.9 million of such arrangements under which borrowings may be made only to fund purchase obligations relating to variable rate pollution control bonds). At March 31, 1998, MISSISSIPPI had $69.0 million of notes payable outstanding. Management believes that the need for working capital can be adequately met by utilizing lines of credit without maintaining large cash balances. 49 SAVANNAH ELECTRIC AND POWER COMPANY 50
SAVANNAH ELECTRIC AND POWER COMPANY CONDENSED STATEMENTS OF INCOME (UNAUDITED) (Stated in Thousands of Dollars) For the Three Months Ended March 31, 1998 1997 OPERATING REVENUES: Revenues $ 48,209 $ 42,887 Revenues from affiliates 172 58 ---------- ---------- Total operating revenues 48,381 42,945 ---------- ---------- OPERATING EXPENSES: Operation-- Fuel 5,808 3,517 Purchased power from non-affiliates 1,213 405 Purchased power from affiliates 10,164 9,282 Other 11,145 10,674 Maintenance 3,678 3,042 Depreciation and amortization 5,258 4,992 Taxes other than income taxes 2,838 2,841 Federal and state income taxes 2,063 2,075 ---------- ---------- Total operating expenses 42,167 36,828 ---------- ---------- OPERATING INCOME 6,214 6,117 OTHER INCOME (EXPENSE): Allowance for equity funds used during construction 21 145 Interest income 68 2 Other, net (429) (184) Income taxes applicable to other income 133 70 ---------- ---------- INCOME BEFORE INTEREST CHARGES 6,007 6,150 ---------- ---------- INTEREST CHARGES: Interest on long-term debt 2,710 2,771 Allowance for debt funds used during construction (26) (80) Interest on notes payable 26 60 Amortization of debt discount, premium, and expense, net 187 181 Other interest charges 103 92 ---------- ---------- Net interest charges 3,000 3,024 ---------- ---------- NET INCOME 3,007 3,126 DIVIDENDS ON PREFERRED STOCK 581 581 ---------- ---------- NET INCOME AFTER DIVIDENDS ON PREFERRED STOCK $ 2,426 $ 2,545 ========== ========== The accompanying notes as they relate to SAVANNAH are an integral part of these condensed statements.
51
SAVANNAH ELECTRIC AND POWER COMPANY CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (Stated in Thousands of Dollars) For the Three Months Ended March 31, 1998 1997 OPERATING ACTIVITIES: Net income $ 3,007 $ 3,126 Adjustments to reconcile net income to net cash provided by operating activities-- Depreciation and amortization 5,654 5,398 Deferred income taxes and investment tax credits, net 20 (783) Allowance for equity funds used during construction (21) (145) Other, net (691) 472 Changes in certain current assets and liabilities-- Receivables, net 4,917 7,382 Inventories (1,778) 14 Payables (3,049) (5,111) Taxes accrued (1,143) 1,293 Other (3,333) (1,148) ------------- ------------ Net cash provided from operating activities 3,583 10,498 ------------- ------------ INVESTING ACTIVITIES: Gross property additions (4,250) (4,628) Other (703) (2,318) ------------- ------------ Net cash used for investing activities (4,953) (6,946) ------------- ------------ FINANCING ACTIVITIES: Proceeds-- Other long-term debt 30,000 - Retirements-- First mortgage bonds (1,100) - Other long-term debt (167) (185) Notes payable, net 3,000 (800) Payment of preferred stock dividends (581) (581) Payment of common stock dividends (5,800) (5,100) Miscellaneous (703) 24 ------------- ------------ Net cash provided from (used for) financing activities 24,649 (6,642) ------------- ------------ NET CHANGE IN CASH AND CASH EQUIVALENTS 23,279 (3,090) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,144 5,214 ------------- ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 29,423 $ 2,124 ============= ============ SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for-- Interest (net of amount capitalized) $ 3,332 $ 3,657 Income taxes 984 - The accompanying notes as they relate to SAVANNAH are an integral part of these condensed statements. 52
SAVANNAH ELECTRIC AND POWER COMPANY CONDENSED BALANCE SHEETS (Stated in Thousands of Dollars) ASSETS At March 31, 1998 At December 31, (Unaudited) 1997 ------------- -------------- UTILITY PLANT: Plant in service, at original cost $ 762,111 $ 760,694 Less accumulated provision for depreciation 326,793 321,509 ------------- ------------ 435,318 439,185 Construction work in progress 10,326 7,709 ------------- ------------ Total 445,644 446,894 ------------- ------------ OTHER PROPERTY AND INVESTMENTS: 1,782 1,783 ------------- ------------ CURRENT ASSETS: Cash and cash equivalents 29,423 6,144 Special deposits - 94 Receivables-- Customer accounts receivable 18,427 21,148 Other accounts and notes receivable 704 720 Affiliated companies 735 1,128 Accumulated provision for uncollectible accounts (386) (354) Fuel cost under recovery 6,033 7,694 Fossil fuel stock, at average cost 7,140 5,205 Materials and supplies, at average cost 6,823 6,980 Prepayments 5,718 5,922 ------------- ------------ Total 74,617 54,681 ------------- ------------ DEFERRED CHARGES: Deferred charges related to income taxes 17,232 17,267 Debt issue expense, being amortized 2,937 2,255 Premium on reacquired debt, being amortized 6,955 7,121 Prepaid pension costs 4,396 3,424 Cash surrender value of life insurance for deferred compensation plans 12,130 12,130 Miscellaneous 2,062 1,797 ------------- ------------ Total 45,712 43,994 ------------- ------------ TOTAL ASSETS $ 567,755 $ 547,352 ============= ============ The accompanying notes as they relate to SAVANNAH are an integral part of these condensed statements.
53
SAVANNAH ELECTRIC AND POWER COMPANY CONDENSED BALANCE SHEETS (Stated in Thousands of Dollars) CAPITALIZATION AND LIABILITIES At March 31, 1998 At December 31, (Unaudited) 1997 ------------ -------------- CAPITALIZATION: Common stock equity-- Common stock (par value $5 per share)-- authorized 16,000,000 shares; outstanding 10,844,635 shares $ 54,223 $ 54,223 Paid-in capital 8,688 8,688 Retained earnings 109,346 112,720 ------------ ------------- 172,257 175,631 Preferred stock 35,000 35,000 Long-term debt 143,778 142,846 ------------ ------------- Total 351,035 353,477 ------------ ------------- CURRENT LIABILITIES: Long-term debt due within one year 49,565 21,764 Notes payable 3,000 - Accounts payable-- Affiliated companies 5,228 6,025 Other 5,018 7,862 Customer deposits 5,557 5,541 Taxes accrued-- Federal and state income - 534 Other 2,182 2,791 Interest accrued 4,424 4,963 Vacation pay accrued 1,921 1,893 Miscellaneous 5,256 9,031 ------------ ------------- Total 82,151 60,404 ------------ ------------- DEFERRED CREDITS AND OTHER LIABILITIES: Accumulated deferred income taxes 81,444 80,697 Accumulated deferred investment tax credits 12,441 12,607 Deferred credits related to income taxes 21,439 21,469 Deferred compensation plans 9,371 9,272 Postretirement benefits 6,296 6,011 Miscellaneous 3,578 3,415 ------------ ------------- Total 134,569 133,471 ------------ ------------- TOTAL CAPITALIZATION AND LIABILITIES $ 567,755 $ 547,352 ============ ============= The accompanying notes as they relate to SAVANNAH are an integral part of these condensed statements. 54
SAVANNAH ELECTRIC AND POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FIRST QUARTER 1998 vs. FIRST QUARTER 1997 RESULTS OF OPERATIONS Earnings SAVANNAH's net income after dividends on preferred stock for the first quarter 1998 was $2.4 million as compared to $2.5 million for the corresponding period of 1997. Significant income statement items appropriate for discussion include the following:
Increase (Decrease) -------------------------------------- (in thousands) % Revenues.......................................... $5,322 12.4 Fuel expense...................................... 2,291 65.1 Purchased power from non-affiliates............... 808 199.5 Purchased power from affiliates................... 882 9.5 Maintenance expense............................... 636 20.9
Revenues. Excluding fuel revenues, which represent the pass-through of fuel expenses and do not affect income, revenues increased $1.4 million for the quarter when compared to the same period of 1997. Revenues for the quarter were up $5.3 million due to a 6.1% increase in retail energy sales. Energy sales to residential, commercial and industrial customers increased by 4.6%, 3.7% and 11.3%, respectively, due to an increase in customers and high usage by a large industrial customer. Fuel expenses. The increase for the quarter is due to increased generation as a result of higher demand for energy. Purchased power from non-affiliates. The increase in purchased power from non-affiliates can primarily be attributed to an increase in energy purchases related to increased power marketing activities, a majority of which were resold to non-affiliated third parties. These transactions had no significant effect on net income. Purchased power from affiliates. Purchases of energy within the Southern electric system will vary from period to period depending on demand and the availability and cost of generating resources at each company. In addition, the first quarter of 1997 reflected an adjustment in affiliated billings. These transactions do not have a significant impact on earnings. Maintenance expense. The increase for the current quarter when compared to the same period in 1997 is due to expenses associated with the Plant Kraft Unit 3 scheduled turbine outage. 55 SAVANNAH ELECTRIC AND POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Future Earnings Potential The results of operations discussed above are not necessarily indicative of future earnings potential. The level of future earnings depends on numerous factors ranging from energy sales growth to a less regulated, more competitive environment. With the enactment of the Energy Act and new legislation being discussed at federal and state levels to expand customer choice, the Southern electric system is positioning the business to meet the challenge of increasing competition. For additional information, see Item 1 - BUSINESS - "Competition" and Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings Potential" of SAVANNAH in the Form 10-K. Compliance costs related to the Clean Air Act could affect earnings if such costs cannot be offset. For additional information about the Clean Air Act and other environmental issues, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS "Environmental Matters" of SAVANNAH in the Form 10-K. In March 1998, The American Institute of Certified Public Accountants issued a new Statement of Position (SOP), Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. The SOP, which must be adopted by 1999, requires capitalization of costs of internal-use software. Adoption of the SOP is not expected to have a material impact on the financial statements. Reference is made to Notes (B) and (Q) in the "Notes to the Condensed Financial Statements" herein for discussion of various contingencies and other matters which may affect future earnings potential. FINANCIAL CONDITION Overview Major changes in SAVANNAH's financial condition during the first three months of 1998 included the addition of approximately $4.3 million to utility plant. The funds for these additions and other capital requirements were derived primarily from operations. See SAVANNAH's Condensed Statements of Cash Flows for further details. Financing Activities In March 1998, SAVANNAH issued $30.0 million of Series A 6 5/8% senior retail intermediate bonds due March 17, 2015. The proceeds of the sales were used by SAVANNAH to redeem in April 1998 the $28.9 million outstanding principal amount of its 8.30% Series First Mortgage Bonds due July 1, 2022. SAVANNAH plans to continue, to the extent possible, a program to retire higher-cost debt and replace these obligations with lower-cost capital. Sources of Capital SAVANNAH plans to obtain the funds required for construction and other purposes from sources similar to those used in the past. The amount, type and timing of any financings--if needed--will depend upon maintenance of adequate earnings, regulatory approval, prevailing market conditions and other factors. See Item 1 - - BUSINESS - "Financing Programs" in the Form 10-K for additional information. 56 SAVANNAH ELECTRIC AND POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION To meet short-term cash needs and contingencies, SAVANNAH had at March 31, 1998, approximately $29.4 million of cash and cash equivalents and approximately $37.5 million of unused credit arrangements with banks. At March 31, 1998, SAVANNAH had $3.0 million outstanding of notes payable to banks. Since SAVANNAH has no major generating plants under construction, management believes that the need for working capital can be adequately met by utilizing lines of credit. 57 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES ALABAMA POWER COMPANY GEORGIA POWER COMPANY GULF POWER COMPANY MISSISSIPPI POWER COMPANY SAVANNAH ELECTRIC AND POWER COMPANY INDEX TO APPLICABLE NOTES TO FINANCIAL STATEMENTS BY REGISTRANT
Registrant Applicable Notes SOUTHERN A, B, C, D, E, F, G, H, I, K, L, M, N, O, P, R ALABAMA A, B, C, F, G, H, K, L GEORGIA A, B, C, F, H, M, N, O, P GULF A, B, F, G, J MISSISSIPPI A, B, F, G SAVANNAH A, B, Q
58 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES ALABAMA POWER COMPANY GEORGIA POWER COMPANY GULF POWER COMPANY MISSISSIPPI POWER COMPANY SAVANNAH ELECTRIC AND POWER COMPANY NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (A) The condensed financial statements of the registrants included herein have been prepared by each registrant, without audit, pursuant to the rules and regulations of the SEC. In the opinion of each registrant's management, the information regarding such registrant furnished herein reflects all adjustments (which included only normal recurring adjustments) necessary to present fairly the results for the periods ended March 31, 1998 and 1997. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although each registrant believes that the disclosures regarding such registrant are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in each registrant's latest annual report on Form 10-K. Certain prior period amounts have been reclassified to conform with current period presentation. The condensed financial statements of ALABAMA and GEORGIA included herein have been reviewed by ALABAMA's and GEORGIA's independent public accountants as set forth in their reports included herein as Exhibit 1 to ALABAMA's and GEORGIA's condensed financial statements. (B) SOUTHERN's operating affiliates are subject to the provisions of FASB Statement No. 71, Accounting for the Effects of Certain Types of Regulation. In the event that a portion of a company's operations is no longer subject to these provisions, the company would be required to write off related unrecoverable regulatory assets and liabilities, and determine if any other assets have been impaired. For additional information, see Note 1 to the financial statements of each registrant in Item 8 of the Form 10-K. (C) The staff of the SEC has questioned certain of the current accounting practices of the electric utility industry--including SOUTHERN's--regarding the recognition, measurement and classification of decommissioning costs for nuclear generating facilities in the financial statements. In response to these questions, the FASB has decided to review the accounting for liabilities related to closure and removal of long-lived assets, including nuclear decommissioning. Reference is made to MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings Potential" of SOUTHERN, ALABAMA and GEORGIA in Item 7 and Note 1 to the financial statements of SOUTHERN, ALABAMA and GEORGIA under "Depreciation and Nuclear Decommissioning" in Item 8 of the Form 10-K. (D) SOUTHERN engages in price risk management activities. Reference is made to MANAGEMENT'S DISCUSSION AND ANALYSIS "Derivative Financial Instruments" and Note 1 to the financial statements of SOUTHERN in Item 8 of the Form 10-K for a discussion of these activities. Activities for non-trading purposes consist of transactions that are employed to mitigate SOUTHERN's risk related to interest rate and foreign currency fluctuations. At March 31, 1998, the status of outstanding non-trading related derivative contracts was as follows: 59 NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
Year of Maturity or Notional Unrealized Type Termination Amount Gain (Loss) (in thousands) Interest rate swaps 2002-2012 $775,970 $(43,063) 2001-2012 (pound)600,000 $(65,292) 2002-2007 DM691,000 $(11,002) Cross currency swaps 2001-2007 (pound)416,300 $(5,310) Cross currency swaption 2003 DM570,000 $7,097 (pound) - Denotes British pounds sterling. DM - Denotes Deutschemark.
Effective in January 1998, Southern Energy and Vastar Resources, Inc. combined their energy trading and marketing activites to form a joint venture. Southern Energy's investment in the joint venture is accounted for under the equity method of accounting. SOUTHERN has made guarantees to certain counterparties regarding performance of contractual commitments by the joint venture. At March 31, 1998, total guarantees were approximately $125 million. (E) Effective December 31, 1997, SOUTHERN adopted FASB Statement No. 131, Disclosure about Segments of an Enterprise and Related Information. SOUTHERN's principal business segment -- or its traditional core business -- is the five regulated electric utility operating companies that provide electric service in four southeastern states. The other reportable business segment is non-traditional energy services provided by Southern Energy, which develops and manages electricity and other energy-related projects both in the United States and abroad. In 1997, non-traditional domestic services included revenues related to energy trading and marketing. As discussed in Note (D) above, effective January 1998, that business is accounted for under the equity method and its revenues are not reflected below for 1998. Intersegment revenues are not material. Financial data for business segments for the periods covered in the Form 10-Q are as follows:
Regulated Domestic All Electric Non-Traditional Services Other Reconciling Utilities International Domestic Total (Note) Eliminations Consolidated ------------ -------------------------------- --------- ------------- --------------- Three Months Ended March 31, 1998: (in millions) Operating revenues $ 1,954 $ 475 $ 33 $ 508 $ 54 $ (2) $ 2,514 Segment net income (loss) 190 57 6 63 (3) (8) 242 Total assets at 3/31/98 24,478 9,582 1,437 11,019 1,256 (1,730) 35,023 ------------------------------------ ------------ ---------- ---------- ---------- --------- ------------- --------------- Three Months Ended March 31, 1997: Operating revenues $ 1,907 $ 475 $ 190 $ 665 $ 14 $ (2) $ 2,584 Segment net income (loss) 188 21 1 22 (23) - 187 Total assets at 12/31/97 24,555 9,225 1,832 11,057 1,223 (1,565) 35,270 ------------------------------------ ------------ ----------- -------- ---------- --------- -------------- ---------------
(Note) The all other category includes parent SOUTHERN, which does not allocate operating expenses to business segments. Also, this category includes segments below the quantitative threshold for separate disclosure. These segments include a wireless communication company and a developmental company for energy products and services. Non-traditional services exclude interest expense to parent SOUTHERN. 60 NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued) (F) Reference is made to Notes 3 and 7 to each of the registrant's financial statements, except SAVANNAH's, in Item 8 of the Form 10-K for a discussion of the proceedings initiated by the FERC regarding the reasonableness of the return on common equity on certain of the Southern electric system's wholesale rate schedules and contracts and a discussion of the long-term sales agreements. On April 3, 1998, three customers under the long-term power sales agreements filed a complaint with the FERC seeking (a) to lower the equity return component in such agreements from the existing return rate of 13.75% and (b) to unbundle the transmission component of such agreements and instead take transmission services under SOUTHERN's open access transmission tariff presently pending before the FERC. The common equity return under these agreements is also subject to the ultimate outcome of the pending FERC proceeding commenced in May 1991 and discussed in Note 3. The final outcome of this matter cannot now be determined. (G) Certain of the registrants and other SOUTHERN subsidiaries have instituted work force reduction programs. The expenses recognized under these programs and the unamortized balance of expenses deferred under regulatory orders were as follows: (in thousands)
Three Months Ended Unamortized Balance March 31, at March 31, 1998 ----------------------- -------------------- 1998 1997 ---- ---- ALABAMA $5,976 $8,598 $14,868 GULF 2,512 1,151 - MISSISSIPPI 32 53 18,236 Other (41) 543 - ------ -------- -------- SOUTHERN system $8,479 $10,345 $33,104 ====== ======= =======
(H) Reference is made to Note 3 to the financial statements of SOUTHERN, ALABAMA and GEORGIA in Item 8 of the Form 10-K for information relating to a settlement agreement entered into between SOUTHERN and the Internal Revenue Service on certain tax issues for the years 1984 through 1987. (I) CEPA has been included in the consolidated financial statements since January 29, 1997. The following unaudited pro forma results of operations for the three months ended March 31, 1997 have been prepared assuming the acquisition of CEPA was effective January 1, 1997. The pro forma results assume acquisition financing of $716 million of short-term borrowings, $792 million of long-term notes and $600 million of capital securities. SOUTHERN's assumed effective composite interest rate on these obligations for each period was 6.82%. These unaudited pro forma results are not necessarily indicative of the actual results that would have been realized had the acquisition occurred on the indicated date, nor are they necessarily indicative of future results. Pro forma operating results are for information purposes only and are as follows: 61 NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
As Reported and Pro Forma Information (Unaudited) (Stated in Thousands of Dollars, except per share) For the Three Months Ended March 31, 1997 As Reported Pro Forma Operating revenues $2,584,414 $2,605,071 Consolidated Net Income 187,013 189,306 Earnings Per Share of Common Stock $0.28 $0.28
(J) During the first quarter of 1998, a statutory business trust, of which GULF owns all the common securities, issued mandatorily redeemable preferred securities as follows: (in thousands)
Maturity Date Company Date of Issue Amount Rate Notes of Notes GULF 1/20/98 $45,000 7.00% $46,392 12/31/2037
Substantially all the assets of the trust are junior subordinated notes issued by GULF in the approximate principal amount set forth above. GULF considers that the mechanisms and obligations relating to the preferred securities issued for its benefit, taken together, constitute a full and unconditional guarantee by it of the trust's payment obligations with respect to the preferred securities. (K) Reference is made to Note 3 to the financial statements of SOUTHERN and ALABAMA in Item 8 of the Form 10-K for information relating to retail rate adjustment procedures. (L) In 1996, legal actions against ALABAMA were filed in several counties in Alabama charging ALABAMA with fraud and non-compliance with regulatory statutes relating to the offer, sale and financing of "extended service contracts" in connection with the sale of electric appliances. See Note 3 to the financial statements of SOUTHERN and ALABAMA in Item 8 of the Form 10-K for additional information. (M) Reference is made to Note 3 to the financial statements of SOUTHERN and GEORGIA in Item 8 of the Form 10-K for information concerning a three-year accounting order approved by the Georgia PSC effective January 1, 1996. Under the order, earnings in excess of a 12.5% retail return on common equity are to be used to accelerate the amortization of regulatory assets or depreciation of electric plant. Accordingly, for earnings in excess of the 12.5% return, GEORGIA recorded charges of $32.0 million and $19.8 million for the three months ended March 31, 1998 and 1997, respectively (presented in the accompanying financial statements as depreciation expense of electric plant and as an addition to the reserve for depreciation). 62 NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued) (N) Reference is made to Note 1 to the financial statements of SOUTHERN and GEORGIA in Item 8 of the Form 10-K for information relating to Plant Vogtle phase-in plans resulting from orders of the Georgia PSC. These Georgia PSC orders provide for the recovery of deferred costs within 10 years. The unamortized balance of these deferred costs at March 31, 1998, was $42.6 million. (O) Reference is made to Note 3 to the financial statements of SOUTHERN and GEORGIA in Item 8 of the Form 10-K for information concerning the recovery by GEORGIA of its costs associated with the Rocky Mountain pumped storage hydroelectric plant. On January 14, 1998, the Georgia PSC ordered that GEORGIA be allowed approximately $108 million of its $143 million investment in the plant in rate base as of December 31, 1998. GEORGIA has appealed the Georgia PSC's order to the Superior Court of Fulton County, Georgia. If such order is ultimately upheld, GEORGIA will be required to record a charge to earnings currently estimated at approximately $27 million, after taxes. The final outcome of this matter cannot now be determined. Accordingly, no provision related to the Georgia PSC's disallowance has been recorded. (P) Reference is made to Note 3 to the financial statements of SOUTHERN and GEORGIA in Item 8 of the Form 10-K for information regarding GEORGIA's designation as a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act and other environmental contingencies. (Q) Reference is made to Note 3 to the financial statements of SAVANNAH in Item 8 of the Form 10-K for information relating to certain regulatory matters. (R) Mobile Energy (a wholly-owned SOUTHERN subsidiary) received notice in May 1998 from a major customer of the customer's intention to close its pulp mill in Mobile, Alabama, for which Mobile Energy provides electricity, steam and other services. The closure of the mill will be effective September 1, 1999. The mill provided approximately 50% of Mobile Energy's operating revenues for the quarter ended March 31, 1998 and for the year ended December 31, 1997. Mobile Energy is evaluating the announced closure of the mill to determine its options and the potential impact on its business. In the event that a sufficient alternative revenue source is not obtained, the mill closure will have a material adverse effect on Mobile Energy's revenues, and, thereafter, it will not have sufficient cash flows to pay principal and interest on its senior debt, including $238 million of first mortgage bonds and $85 million related to tax-exempt bonds. There can be no assurance that any available alternative will permit Mobile Energy to pay its debt service. At March 31, 1998, Mobile Energy had total assets of $388 million and equity of $16 million. The ultimate outcome of this situation cannot now be determined. 63 PART II - OTHER INFORMATION Item 1. Legal Proceedings. Reference is made to the Notes to the Condensed Financial Statements herein for information regarding certain legal and administrative proceedings in which SOUTHERN and its reporting subsidiaries are involved. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. Exhibit 24 - Powers of Attorney and resolutions. (Designated in the Form 10-K for the year ended December 31, 1997, File Nos. 1-3526, 1-3164, 1-6468, 0-2429, 0-6849 and 1-5072 as Exhibits 24(a), 24(b), 24(c), 24(d), 24(e) and 24(f), respectively, and incorporated herein by reference.) Exhibits 27 - Financial Data Schedules (a) SOUTHERN (b) ALABAMA (c) GEORGIA (d) GULF (e) MISSISSIPPI (f) SAVANNAH (b) Reports on Form 8-K. GULF filed a Current Report on Form 8-K dated January 13, 1998: Items reported: Item 5 Item 7 Financial statements filed: None GEORGIA filed a Current Report on Form 8-K dated January 21, 1998: Items reported: Item 5 Item 7 Financial statements filed: None SOUTHERN, ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH each filed a Current Report on Form 8-K dated February 11, 1998: Item reported: Item 7 Financial statements filed: Each registrant's audited financial statements for the year ended December 31, 1997. 64 Item 6. Exhibits and Reports on Form 8-K. (b) Reports on Form 8-K. (Continued) ALABAMA filed a Current Report on Form 8-K dated February 20, 1998: Items reported: Item 5 Item 7 Financial statements filed: None SAVANNAH filed a Current Report on Form 8-K dated March 9, 1998: Items reported: Item 5 Item 7 Financial statements filed: None 65 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof. THE SOUTHERN COMPANY By A. W. Dahlberg Chairman, President and Chief Executive Officer (Principal Executive Officer) By W. L. Westbrook Financial Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) By /s/ Wayne Boston (Wayne Boston, Attorney-in-fact) Date: May 15, 1998 - ------------------------------------------------------------------------------ Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof. ALABAMA POWER COMPANY By Elmer B. Harris President and Chief Executive Officer (Principal Executive Officer) By William B. Hutchins, III Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) By /s/ Wayne Boston (Wayne Boston, Attorney-in-fact) Date: May 15, 1998 66 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof. GEORGIA POWER COMPANY By H. Allen Franklin President and Chief Executive Officer (Principal Executive Officer) By Warren Y. Jobe Executive Vice President, and Chief Financial Officer (Principal Financial Officer) By /s/ Wayne Boston (Wayne Boston, Attorney-in-fact) Date: May 15, 1998 - ------------------------------------------------------------------------------ Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof. GULF POWER COMPANY By Travis J. Bowden President and Chief Executive Officer (Principal Executive Officer) By A. E. Scarbrough Vice President - Finance (Principal Financial and Accounting Officer) By /s/ Wayne Boston (Wayne Boston, Attorney-in-fact) Date: May 15, 1998 67 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof. MISSISSIPPI POWER COMPANY By Dwight H. Evans President and Chief Executive Officer (Principal Executive Officer) By Michael W. Southern Vice President, Secretary, Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer) By /s/ Wayne Boston (Wayne Boston, Attorney-in-fact) Date: May 15, 1998 - ------------------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof. SAVANNAH ELECTRIC AND POWER COMPANY By G. Edison Holland, Jr. President and Chief Executive Officer (Principal Executive Officer) By Kirby R. Willis Vice President, Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer) By /s/ Wayne Boston (Wayne Boston, Attorney-in-fact) Date: May 15, 1998 68 EX-27 2 FINANCIAL DATA SCHEDULE - SOUTHERN COMPANY
UT This schedule contains summary financial information extracted from the Form 10-Q for March 31, 1998, and is qualified in its entirety by reference to such financial statements. 0000092122 THE SOUTHERN COMPANY 1,000 3-MOS DEC-31-1997 MAR-31-1998 PER-BOOK 23,698,961 5,775,256 3,139,435 2,409,587 0 35,023,239 3,484,735 2,400,654 3,858,263 9,743,652 1,789,980 452,575 6,172,722 652,477 4,113,789 1,292,762 889,538 40,684 133,247 4,470 9,737,343 35,023,239 2,513,715 142,113 1,923,452 2,065,565 448,150 81,120 529,270 280,928 248,342 6,640 241,702 232,449 0 563,866 0.35 0.35
EX-27 3 FINANCIAL DATA SCHEDULE - ALABAMA POWER COMPANY
UT This schedule contains summary financial information extracted from the Form 10-Q for March 31, 1998, and is qualified in its entirety by reference to such financial statements. 0000003153 ALABAMA POWER COMPANY 1,000 3-MOS DEC-31-1997 MAR-31-1998 PER-BOOK 7,120,968 251,596 721,968 722,546 0 8,817,078 224,358 1,304,744 1,195,075 2,724,177 297,000 255,512 1,750,059 0 393,800 259,015 124,155 0 399,667 1,000 2,612,693 8,817,078 716,505 42,557 543,213 585,770 130,735 8,738 139,473 70,104 69,369 3,328 66,041 90,400 0 170,199 0 0
EX-27 4 FINANCIAL DATA SCHEDULE - GEORGIA POWER COMPANY
UT This schedule contains summary financial information extracted from the Form 10-Q for March 31, 1998, and is qualified in its entirety by reference to such financial statements. 0000041091 GEORGIA POWER COMPANY 1,000 3-MOS DEC-31-1997 MAR-31-1998 PER-BOOK 9,990,758 342,631 997,991 1,146,582 0 12,477,962 344,250 1,930,131 1,719,751 3,994,132 689,250 116,568 2,752,010 72,800 145,000 213,501 189,990 40,679 231,172 404 4,032,456 12,477,962 984,143 80,649 726,953 807,602 176,541 (767) 175,774 67,843 107,931 2,027 105,904 132,100 0 254,159 0 0
EX-27 5 FINANCIAL DATA SCHEDULE - GULF POWER COMPANY
UT This schedule contains summary financial information extracted from the Form 10-Q for March 31, 1998, and is qualified in its entirety by reference to such financial statements. 0000044545 GULF POWER COMPANY 1,000 3-MOS DEC-31-1997 MAR-31-1998 PER-BOOK 1,051,002 621 121,178 71,716 0 1,244,517 38,060 218,450 164,062 420,572 85,000 13,686 248,670 26,500 47,000 0 47,572 5 0 0 355,512 1,244,517 140,950 4,150 121,563 125,713 15,237 (723) 14,514 7,452 7,062 209 6,853 24,100 0 18,476 0 0
EX-27 6 FINANCIAL DATA SCHEDULE - MISSISSIPPI POWER COMPAN
UT This schedule contains summary financial information extracted from the Form 10-Q for March 31, 1998, and is qualified in its entirety by reference to such financial statements. 0000066904 MISSISSIPPI POWER COMPANY 1,000 3-MOS DEC-31-1997 MAR-31-1998 PER-BOOK 1,001,857 650 106,877 59,898 0 1,169,282 37,691 179,715 166,105 383,511 35,000 31,809 211,735 69,000 80,000 0 20 0 0 0 358,207 1,169,282 122,156 4,932 101,857 106,789 15,367 (30) 15,337 6,454 8,883 495 8,388 12,700 0 (5,591) 0 0
EX-27 7 FINANCIAL DATA SCHEDULE - SAVANNAH ELECTRIC AND
UT This schedule contains summary financial information extracted from the Form 10-Q for March 31, 1998, and is qualified in its entirety by reference to such financial statements. 0000086940 SAVANNAH ELECTRIC AND POWER COMPANY 1,000 3-MOS DEC-31-1997 MAR-31-1998 PER-BOOK 445,644 1,782 74,617 45,712 0 567,755 54,223 8,688 109,346 172,257 0 35,000 97,290 3,000 40,000 0 49,565 0 5,823 665 164,155 567,755 48,381 2,063 40,104 42,167 6,214 (207) 6,007 3,000 3,007 581 2,426 5,800 0 3,583 0 0
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