-----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, LKq6QaLCBIduyHeZjtRiDvGIhorCdQRxm80QnfluKy2o9QenlrPTBJhawzmig8Ub ofDm4ursO83tKirMiuiLrg== 0000092122-00-000076.txt : 20000516 0000092122-00-000076.hdr.sgml : 20000516 ACCESSION NUMBER: 0000092122-00-000076 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 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: 635343 BUSINESS ADDRESS: STREET 1: 270 PEACHTREE ST CITY: ATLANTA STATE: GA ZIP: 30303 BUSINESS PHONE: 4045065000 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: 635344 BUSINESS ADDRESS: STREET 1: 600 N 18TH ST STREET 2: P O BOX 2641 CITY: BIRMINGHAM STATE: AL ZIP: 35291 BUSINESS PHONE: 2052571000 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: 635345 BUSINESS ADDRESS: STREET 1: 241 RALPH MCGILL BOULEVARD CITY: ATLANTA STATE: GA ZIP: 30308 BUSINESS PHONE: 4045066526 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: 635346 BUSINESS ADDRESS: STREET 1: ONE ENERGY PLACE CITY: PENSACOLA STATE: FL ZIP: 32520-0102 BUSINESS PHONE: 8504446111 MAIL ADDRESS: STREET 1: ONE ENERGY PLACE CITY: PENSACOLA STATE: FL ZIP: 32520-0102 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: 635347 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: 635348 BUSINESS ADDRESS: STREET 1: 600 BAY ST EAST CITY: SAVANNAH STATE: GA ZIP: 31401 BUSINESS PHONE: 9122327171 10-Q 1 FIRST QUARTER FORM 10-Q 2000 =============================================================================== UNITED STATES 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, 2000 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 (404) 506-5000 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) One Energy Place Pensacola, Florida 32520 (850) 444-6111 0-6849 Mississippi Power Company 64-0205820 (A Mississippi Corporation) 2992 West Beach Gulfport, Mississippi 39501 (228) 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, 2000 The Southern Company Par Value $5 Per Share 648,623,748 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.
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INDEX TO QUARTERLY REPORT ON FORM 10-Q March 31, 2000 Page Number DEFINITIONS........................................................................................................ 4 PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) 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........................................................ 7 Condensed Consolidated Statements of Cash Flows.................................................... 8 Condensed Consolidated Balance Sheets.............................................................. 9 Condensed Consolidated Statements of Comprehensive Income and Accumulated Other Comprehensive Income.......................................................... 11 Management's Discussion and Analysis of Results of Operations and Financial Condition.............. 12 Alabama Power Company Condensed Statements of Income..................................................................... 18 Condensed Statements of Cash Flows................................................................. 19 Condensed Balance Sheets........................................................................... 20 Management's Discussion and Analysis of Results of Operations and Financial Condition.............. 22 Exhibit 1 - Report of Independent Public Accountants............................................... 25 Georgia Power Company Condensed Statements of Income..................................................................... 27 Condensed Statements of Cash Flows................................................................. 28 Condensed Balance Sheets........................................................................... 29 Management's Discussion and Analysis of Results of Operations and Financial Condition.............. 31 Exhibit 1 - Report of Independent Public Accountants............................................... 35 Gulf Power Company Condensed Statements of Income..................................................................... 37 Condensed Statements of Cash Flows................................................................. 38 Condensed Balance Sheets........................................................................... 39 Management's Discussion and Analysis of Results of Operations and Financial Condition.............. 41 Mississippi Power Company Condensed Statements of Income..................................................................... 45 Condensed Statements of Cash Flows................................................................. 46 Condensed Balance Sheets........................................................................... 47 Management's Discussion and Analysis of Results of Operations and Financial Condition.............. 49 Savannah Electric and Power Company Condensed Statements of Income..................................................................... 53 Condensed Statements of Cash Flows................................................................. 54 Condensed Balance Sheets........................................................................... 55 Management's Discussion and Analysis of Results of Operations and Financial Condition.............. 57 Notes to the Condensed Financial Statements........................................................... 60 Item 3. Quantitative and Qualitative Disclosures about Market Risk............................................ 61 PART II - OTHER INFORMATION Item 1. Legal Proceedings......................................................................................... 65 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.......................................................................... 65 Signatures ............................................................................................... 67
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DEFINITIONS TERM MEANING ALABAMA..................................... Alabama Power Company BEWAG....................................... Berliner Kraft und Licht AG CEPA........................................ Consolidated Electric Power Asia Limited Clean Air Act............................... Clean Air Act Amendments of 1990 ECO Plan.................................... Environmental Compliance Overview Plan Energy Act.................................. Energy Policy Act of 1992 EPA......................................... U. S. Environmental Protection Agency 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, 1999 FUCO........................................ Foreign utility company GEORGIA..................................... Georgia Power Company GULF........................................ Gulf Power Company integrated Southeast utilities.............. ALABAMA, GEORGIA, GULF, MISSISSIPPI, and SAVANNAH MISSISSIPPI................................. Mississippi Power Company Mobile Energy............................... Mobile Energy Services Company, L.L.C. and Mobile Energy Services Holdings, Inc. OPC......................................... Oglethorpe Power Corporation PEP......................................... Performance Evaluation Plan PSC......................................... Public Service Commission RTO......................................... Regional Transmission Organization SAVANNAH.................................... Savannah Electric and Power Company SCS......................................... Southern Company Services, Inc. SEC......................................... Securities and Exchange Commission SOUTHERN.................................... The Southern Company Southern Energy............................. Southern Energy, Inc. including SOUTHERN subsidiaries managed or controlled by Southern Energy SOUTHERN system............................. SOUTHERN, integrated Southeast utilities, Southern Energy, and other subsidiaries TVA......................................... Tennessee Valley Authority WPD......................................... Western Power Distribution (United Kingdom) (formerly South Western Electricity plc)
4 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 businesses, internal restructuring or other restructuring options, 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. 5 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES 6
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) For the Three Months Ended March 31, 2000 1999 ---------------- ---------------- --------------------------------- (in thousands) Operating Revenues: Retail sales $1,782,708 $1,674,783 Sales for resale 177,929 166,211 Southern Energy revenues 520,984 521,554 Other revenues 90,966 79,017 ---------------- ---------------- ---------------- ---------------- Total operating revenues 2,572,587 2,441,565 ---------------- ---------------- ---------------- ---------------- Operating Expenses: Operation -- Fuel 648,749 512,466 Purchased power 104,421 274,426 Other 471,796 487,069 Maintenance 241,178 221,286 Depreciation and amortization 377,292 315,081 Taxes other than income taxes 159,775 146,262 ---------------- ---------------- ---------------- ---------------- Total operating expenses 2,003,211 1,956,590 ---------------- ---------------- ---------------- ---------------- Operating Income 569,376 484,975 Other Income: Interest income 27,325 29,486 Equity in earnings of unconsolidated subsidiaries 21,157 94,681 Other, net 46,659 26,712 ---------------- ---------------- ---------------- ---------------- Earnings Before Interest and Income Taxes 664,517 635,854 ---------------- ---------------- ---------------- ---------------- Interest Charges and Other: Interest on long-term debt 200,349 166,353 Interest on notes payable 67,104 27,457 Amortization of debt discount, premium and expense, net 8,577 9,020 Other interest charges, net 2,704 13,197 Minority interests in subsidiaries 30,068 21,343 Distributions on capital and preferred securities of subsidiaries 44,066 43,767 Preferred dividends of subsidiaries 4,695 5,633 ---------------- ---------------- ---------------- ---------------- Total interest charges and other, net 357,563 286,770 ---------------- ---------------- ---------------- ---------------- Earnings Before Income Taxes 306,954 349,084 Income taxes 61,510 124,768 ---------------- ---------------- ---------------- ---------------- Consolidated Net Income $245,444 $224,316 ================ ================ ================ ================ Common Stock Data: Average number of shares of common stock outstanding (in thousands) 653,134 698,527 Basic and diluted earnings per share of common stock $0.38 $0.32 Cash dividends paid per share of common stock $0.335 $0.335 The accompanying notes as they relate to SOUTHERN are an integral part of these statements.
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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Three Months Ended March 31, 2000 1999 ----------------- ----------------- (in thousands) Operating Activities: Consolidated net income $245,444 $224,316 Adjustments to reconcile consolidated net income to net cash provided from operating activities -- Depreciation and amortization 407,671 357,985 Deferred income taxes and investment tax credits 9,695 33,503 Equity in earnings of unconsolidated subsidiaries (21,157) (94,681) Other, net (14,437) 35,896 Changes in certain current assets and liabilities excluding effects from acquisitions -- Receivables, net 161,770 160,663 Fossil fuel stock (1,879) (64,830) Materials and supplies (10,264) (3,573) Accounts payable (148,196) (321,441) Other (292,500) (138,575) ----------------- ----------------- Net cash provided from operating activities 336,147 189,263 ----------------- ----------------- Investing Activities: Gross property additions (539,599) (504,592) Southern Energy business acquisitions, net of cash acquired (918) (38,570) Other (84,914) (53,934) ----------------- ----------------- Net cash used for investing activities (625,431) (597,096) ----------------- ----------------- Financing Activities: Increase (decrease) in notes payable, net 617,416 476,648 Proceeds -- Other long-term debt 521,812 348,271 Capital and preferred securities - 250,000 Common stock 43 23,705 Retirements/repurchases -- First mortgage bonds (200,000) (504,000) Other long-term debt (88,612) (223,355) Preferred stock (279) (85,679) Common stock repurchased (414,298) - Payment of common stock dividends (220,557) (233,879) Other 78,436 38,864 ----------------- ----------------- Net cash provided from financing activities 293,961 90,575 ----------------- ----------------- Net Increase (Decrease) in Cash and Cash Equivalents 4,677 (317,258) Cash and Cash Equivalents at Beginning of Year 466,416 871,353 ----------------- ----------------- Cash and Cash Equivalents at End of Year $471,093 $554,095 ================= ================= Supplemental Cash Flow Information: Cash paid during the period for -- Interest (net of amount capitalized) $340,050 $286,368 Income taxes (net of refunds) $4,648 $25,057 Southern Energy business acquisitions -- Fair value of assets acquired $918 $38,570 Less cash paid for common stock 918 38,570 ----------------- ----------------- Liabilities assumed - - ================= ================= The accompanying notes as they relate to SOUTHERN are an integral part of these statements.
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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED BALANCE SHEETS At March 31, 2000 At December 31, Assets (Unaudited) 1999 ------------------- ------------------- (in thousands) Current Assets: Cash and cash equivalents $ 471,093 $ 466,416 Special deposits 51,911 72,490 Receivables, less accumulated provisions for uncollectible accounts of $71,068 at March 31, 2000 and $80,765 at December 31, 1999 1,395,144 1,629,980 Unrecovered retail fuel clause revenue 216,572 243,791 Fossil fuel stock, at average cost 312,514 310,635 Materials and supplies, at average cost 595,344 585,080 Other 271,408 198,823 ------------------- ------------------- Total current assets 3,313,986 3,507,215 ------------------- ------------------- Property, Plant, and Equipment: In service 36,918,270 36,763,700 Less accumulated provision for depreciation 14,345,511 14,075,044 ------------------- ------------------- 22,572,759 22,688,656 Nuclear fuel, at amortized cost 204,068 226,124 Construction work in progress 1,916,514 1,629,701 ------------------- ------------------- Total property, plant, and equipment 24,693,341 24,544,481 ------------------- ------------------- Other Property and Investments: Equity investments in unconsolidated subsidiaries 1,355,738 1,376,357 Property rights, net of accumulated amortization of $249,391 at March 31, 2000 and $226,866 at December 31, 1999 2,185,415 2,202,206 Goodwill, net of accumulated amortization of $178,437 at March 31, 2000 and $163,560 at December 31, 1999 2,090,904 2,105,859 Other intangibles, net of accumulated amortization of $17,048 at March 31, 2000 and $13,308 at December 31, 1999 443,187 446,927 Nuclear decommissioning trusts 703,734 658,567 Leveraged leases 550,716 556,419 Other 653,848 578,231 ------------------- ------------------- Total other property and investments 7,983,542 7,924,566 ------------------- ------------------- Deferred Charges and Other Assets: Deferred charges related to income taxes 963,317 987,144 Prepaid pension costs 627,455 590,274 Debt expense, being amortized 142,081 145,092 Premium on reacquired debt, being amortized 212,235 217,125 Other 515,557 457,770 ------------------- ------------------- Total deferred charges and other assets 2,460,645 2,397,405 ------------------- ------------------- ------------------- ------------------- Total Assets $38,451,514 $38,373,667 =================== =================== The accompanying notes as they relate to SOUTHERN are an integral part of these statements.
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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED BALANCE SHEETS At March 31, 2000 At December 31, Liabilities and Stockholders' Equity (Unaudited) 1999 ------------------- ------------------- (in thousands) Current Liabilities: Securities due within one year $ 378,919 $ 576,299 Notes payable 4,526,196 3,915,258 Accounts payable 692,587 895,456 Customer deposits 136,326 132,555 Taxes accrued -- Income taxes 196,481 155,326 Other 191,288 263,899 Interest accrued 237,452 281,272 Vacation pay accrued 119,711 120,360 Other 647,593 793,334 ------------------- ------------------- Total current liabilities 7,126,553 7,133,759 ------------------- ------------------- ------------------- ------------------- Long-term debt 12,140,624 11,746,596 ------------------- ------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 4,490,303 4,504,896 Deferred credits related to income taxes 614,343 639,921 Accumulated deferred investment tax credits 685,930 693,422 Employee benefits provisions 526,971 513,395 Prepaid capacity revenues 74,574 79,703 Other 534,769 437,689 ------------------- ------------------- Total deferred credits and other liabilities 6,926,890 6,869,026 ------------------- ------------------- ------------------- ------------------- Minority interests in subsidiaries 751,271 724,610 ------------------- ------------------- ------------------- ------------------- Company or subsidiary obligated mandatorily redeemable capital and preferred securities 2,326,015 2,326,835 ------------------- ------------------- Cumulative preferred stock of subsidiaries 368,230 368,509 ------------------- ------------------- Common Stockholders' Equity: Common stock, par value $5 per share -- Authorized -- 1 billion shares Issued -- March 31, 2000: 700,621,976 shares; -- December 31, 1999: 700,620,486 shares 3,503,110 3,503,102 Paid-in capital 2,480,307 2,480,198 Treasury, at cost -- March 31, 2000: 51,998,228 shares; -- December 31, 1999: 34,824,901 shares (1,333,396) (918,972) Retained earnings 4,257,223 4,232,399 Accumulated other comprehensive income (95,313) (92,395) ------------------- ------------------- Total common stockholders' equity 8,811,931 9,204,332 ------------------- ------------------- Total Liabilities and Stockholders' Equity $38,451,514 $38,373,667 =================== =================== The accompanying notes as they relate to SOUTHERN are an integral part of these statements.
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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) For the Three Months Ended March 31, ---------------------------------------- 2000 1999 ---------------------------------------- (in thousands) Consolidated net income $245,444 $224,316 Other comprehensive income: Foreign currency translation adjustments (4,489) (164,137) Related income tax benefits 1,571 57,448 ------------------ ------------------ CONSOLIDATED COMPREHENSIVE INCOME $242,526 $117,627 ================== ==================
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE INCOME At March 31, 2000 At December 31, (Unaudited) 1999 ---------------------------------------- (in thousands) Balance at beginning of period ($92,395) $15,400 Change in current period (2,918) (107,795) ------------------ ------------------ BALANCE AT END OF PERIOD ($95,313) ($92,395) ================== ================== The accompanying notes as they relate to SOUTHERN are an integral part of these statements.
11 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FIRST QUARTER 2000 vs. FIRST QUARTER 1999 RESULTS OF OPERATIONS SOUTHERN's traditional business is primarily represented by its five integrated Southeast utilities, which provide electric service in four states. Another significant portion of SOUTHERN's business is represented by Southern Energy, which owns and manages domestic and international 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 result from such acquisitions. Reference is made to Note (N) in the "Notes to the Condensed Financial Statements" herein for information relating to the planned initial public offering and subsequent spin-off of Southern Energy. Earnings SOUTHERN's consolidated net income for the first quarter of 2000 was $245 million ($0.38 per share) compared to $224 million ($0.32 per share) for the corresponding period of 1999. Earnings for the integrated Southeast utilities increased during the first quarter of 2000 when compared to the same period in 1999 by $8 million or 3.8% due primarily to increased operating revenues. Earnings for Southern Energy in the first quarter of 2000 rose $13 million or 14.9% above the amount recorded in the same period of the prior year. The increase in Southern Energy's earnings is mainly due to the growing profitability from its Asian business units primarily due to the Sual generating units being placed in service during the latter part of 1999. Significant income statement items appropriate for discussion include the following: Increase (Decrease) ----------------------------- First Quarter (in thousands) % Operating revenues............................... $131,022 5.4 Fuel expense..................................... 136,283 26.6 Purchased power expense.......................... (170,005) (61.9) Maintenance expense.............................. 19,892 9.0 Depreciation and amortization expense............ 62,211 19.7 Equity in earnings of unconsolidated subsidiaries (73,524) (77.7) Other, net....................................... 19,947 74.7 Interest on long-term debt....................... 33,996 20.4 Interest on notes payable........................ 39,647 144.4 Operating revenues. For the integrated Southeast utilities, operating revenues increased $123 million or 6.6% during the first quarter of 2000 over the corresponding period in 1999 due primarily to a $108 million increase in retail revenues. Retail revenues increased as a result of growth in the number of customers and increased demand for energy. Energy sales to residential, commercial and industrial customers were up by 3.9%, 7.5% and 2.9%, respectively. 12 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Fuel expense. These expenses for the integrated Southeast utilities were up $53 million or 11.3% when compared to the corresponding period in 1999, due primarily to higher demand for energy. Southern Energy's fuel expense in the first quarter of 2000 was up $84 million or 200.5% from the same period in 1999. This increase is primarily due to the acquisitions in 1999 of generating assets in New York and California. Purchased power expense. The first quarter 2000 decrease is attributed primarily to Southern Energy which had a decrease of $198 million or 86.8% due to the sale of SWEB's supply business and was partially offset by a $27 million increase in purchased power expense at the integrated Southeast utilities. Maintenance expense. Maintenance expenses were up $13 million or 6.3% for the integrated Southeast utilities during the first quarter of 2000 as compared to the same period in the prior year. The increase was primarily due to maintenance performed on steam and nuclear power generation facilities and distribution lines. Southern Energy's first quarter 2000 maintenance expenses were up $8 million or 28.9% from the corresponding period in 1999. The increase was primarily due to the acquisitions in 1999 of generating assets in New York and California. Depreciation and amortization expense. This expense for the integrated Southeast utilities increased $29 million in the first quarter of 2000 as compared to the corresponding period in 1999, principally due to accelerated amortization of $36.6 million recorded by GEORGIA under a three-year rate order. See Note (H) in the "Notes to the Condensed Financial Statements" herein for further details regarding the retail rate order. Depreciation and amortization expense for Southern Energy during the first quarter of 2000 increased $32 million or 58.7% primarily due to the increase in assets in Asia and North America. Equity in earnings of unconsolidated subsidiaries. During the first quarter of 2000, the decrease in this item when compared to the same period in 1999 is attributed to Southern Energy. The decrease is a direct result of the $54 million settlement recognized during the first quarter of 1999 representing Southern Energy's claims against a contractor relating to the Shajiao C construction project in China and the improvement in profitability of the Shajiao C operation which was partially offset by other related expenses and income taxes included in other income accounts,and a decrease in the sales price of electricity at BEWAG due to the onset of deregulation and price competition in Germany. Other, net. The first quarter of 2000 increased when compared to the corresponding period in 1999 due primarily to Southern Energy. This increase is primarily the result of recovery of $29 million in receivables related to Shajiao C reserved as uncollectible in 1999 which were partially offset by various contract settlements and gains on asset sales that were recognized during the first quarter of 1999. Interest on long-term debt. The increase in this item during the first quarter of 2000 from the amount recorded in 1999 primarily reflects Southern Energy's higher outstanding long-term debt. Interest on notes payable. This first quarter 2000 increase in interest on notes payable when compared to the same period in 1999 is attributed primarily to Southern Energy which had an increase of $23 million and, to a lesser extent, SOUTHERN which had an increase of $11 million as a result of borrowings in connection with its recently completed common stock repurchase program. 13 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES 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 weather to energy sales growth to a less regulated, more competitive environment, with non-traditional business becoming more significant. For additional information relating to Southern Energy and other businesses, see Item 1 - BUSINESS - "Southern Energy" and "Other Business" in the Form 10-K. Also, reference is made to Note (N) in the "Notes to the Condensed Financial Statements" herein for information relating to the planned initial public offering and subsequent spin-off of Southern Energy. 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. On December 20, 1999, the FERC issued its final rule on RTOs. Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings Potential" of SOUTHERN in the Form 10-K for information on this matter. Reference is also made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Environmental Protection Agency Litigation" and Note 3 to the financial statements of SOUTHERN in the Form 10-K for information on EPA litigation. The FASB issued Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, which must be adopted by January 2001. This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. SOUTHERN has not yet quantified the impact of adopting this statement on its financial statements; however, the adoption could increase volatility in earnings and other comprehensive income. Reference is made to Notes (B) through (D), (F) through (J), (L), (M) and (O) 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. 14 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FINANCIAL CONDITION Overview Major changes in SOUTHERN's financial condition during the first three months of 2000 included $539.6 million used for gross property additions to utility plant. The funds for these additions and other capital requirements were from operations, short-term borrowings and other long-term debt. See SOUTHERN's Condensed Consolidated Statements of Cash Flows for further details. Reference is made to the SOUTHERN's Condensed Consolidated Statements of Comprehensive Income herein for information relating to other comprehensive income. Financing Activities During the first three months of 2000, maturities of the integrated Southeast utilities' first mortgage bonds totaled $200 million. In February 2000, GEORGIA issued $300 million of floating rate senior notes due February 22, 2002. The proceeds of the sale were used to repay a portion of its outstanding short-term indebtedness. In March 2000, MISSISSIPPI issued $100 million of floating rate senior notes due March 28, 2002. The proceeds were used to prepay bank loans of $45 million maturing in November 2001 and $5 million maturing in October 2002. The balance was applied to repay a portion of its outstanding short-term indebtedness. Reference is made to Note (M) in the "Notes to the Condensed Financial Statements" herein for discussion of a program to repurchase SOUTHERN's common stock. The market price of SOUTHERN's common stock at March 31, 2000 was $21.75 per share and the book value was $13.59 per share, representing a market-to-book ratio of 160%, compared to $23.50, $13.82 and 170%, respectively, at the end of 1999. The dividend for the first quarter of 2000 was $0.335 per share. Capital Requirements Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Capital Requirements for Construction", "Other Capital Requirements" and "Environmental Matters" of SOUTHERN in the Form 10-K for a description of the Southern electric system's capital requirements for its construction program, sinking fund requirements and maturing debt, and environmental compliance efforts. Approximately $379 million will be required by March 31, 2001, for redemptions and maturities of long-term debt. Also, the integrated Southeast utilities 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. 15 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION 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 2000, 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, 2000, approximately $471.1 million of cash and cash equivalents and approximately $5.9 billion of unused credit arrangements with banks. These unused credit arrangements also provide liquidity support to variable rate pollution control bonds and commercial paper programs. At March 31, 2000, the system companies had outstanding approximately $2.2 billion of short-term notes payable and $2.3 billion 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. 16 ALABAMA POWER COMPANY 17
ALABAMA POWER COMPANY CONDENSED STATEMENTS OF INCOME (UNAUDITED) For the Three Months Ended March 31, 2000 1999 ---------------- ---------------- (in thousands) Operating Revenues: Retail sales $606,126 $567,900 Sales for resale -- Non-affiliates 96,131 85,565 Affiliates 28,669 47,101 Other revenues 15,251 13,758 ---------------- ---------------- Total operating revenues 746,177 714,324 ---------------- ---------------- Operating Expenses: Operation -- Fuel 195,074 188,014 Purchased power -- Non-affiliates 18,872 7,580 Affiliates 26,865 27,427 Other 112,246 117,896 Maintenance 76,834 70,774 Depreciation and amortization 90,472 87,182 Taxes other than income taxes 54,152 53,061 ---------------- ---------------- Total operating expenses 574,515 551,934 ---------------- ---------------- Operating Income 171,662 162,390 Other Income: Interest income 5,926 9,446 Equity in earnings of unconsolidated subsidiaries 859 768 Other, net (1,082) (5,503) ---------------- ---------------- Earnings Before Interest and Income Taxes 177,365 167,101 ---------------- ---------------- Interest Charges and Other: Interest on long-term debt 52,052 45,060 Interest on notes payable 2,942 2,675 Amortization of debt discount, premium and expense, net 2,839 2,718 Other interest charges, net 1,075 6,091 Distributions on preferred securities of subsidiary 6,336 5,831 ---------------- ---------------- Total interest charges and other, net 65,244 62,375 ---------------- ---------------- Earnings Before Income Taxes 112,121 104,726 Income taxes 40,641 37,776 ---------------- ---------------- Net Income 71,480 66,950 Dividends on Preferred Stock 3,968 3,875 ---------------- ---------------- Net Income After Dividends on Preferred Stock $67,512 $63,075 ================ ================ The accompanying notes as they relate to ALABAMA are an integral part of these condensed statements.
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ALABAMA POWER COMPANY CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Three Months Ended March 31, 2000 1999 ----------------- ----------------- (in thousands) Operating Activities: Net income $71,480 $66,950 Adjustments to reconcile net income to net cash provided from operating activities -- Depreciation and amortization 101,947 102,538 Deferred income taxes and investment tax credits, net (2,423) 2,526 Other, net (22,451) 17,640 Changes in certain current assets and liabilities -- Receivables, net 40,702 73,983 Fossil fuel stock (8,814) (17,231) Materials and supplies (7,327) (325) Accounts payable (48,113) (101,665) Energy cost recovery, retail 23,037 22,450 Other (17,973) (32,377) ----------------- ----------------- Net cash provided from operating activities 130,065 134,489 ----------------- ----------------- Investing Activities: Gross property additions (193,894) (142,065) Other (2,365) (21,592) ----------------- ----------------- Net cash used for investing activities (196,259) (163,657) ----------------- ----------------- Financing Activities: Increase (decrease) in notes payable, net 274,871 322,653 Proceeds -- Preferred securities - 50,000 Redemptions -- First mortgage bonds (100,000) (300,000) Other long-term debt (1,685) (246) Preferred stock - (50,000) Payment of preferred stock dividends (4,028) (4,487) Payment of common stock dividends (103,600) (98,000) Other (20) (3,096) ----------------- ----------------- Net cash provided from (used for) financing activities 65,538 (83,176) ----------------- ----------------- Net Change in Cash and Cash Equivalents (656) (112,344) Cash and Cash Equivalents at Beginning of Period 19,475 134,248 ----------------- ----------------- Cash and Cash Equivalents at End of Period $18,819 $21,904 ================= ================= Supplemental Cash Flow Information: Cash paid during the period for -- Interest (net of amount capitalized) $50,316 $60,563 Income taxes (net of refunds) $529 ($14,000) The accompanying notes as they relate to ALABAMA are an integral part of these condensed statements.
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ALABAMA POWER COMPANY CONDENSED BALANCE SHEETS At March 31, 2000 At December 31, Assets (Unaudited) 1999 ------------------ ------------------ (in thousands) Current Assets: Cash and cash equivalents $ 18,819 $ 19,475 Receivables -- Customer accounts receivable 230,138 265,900 Unrecovered retail fuel clause revenue 145,590 168,627 Other accounts and notes receivable 33,827 42,137 Affiliated companies 43,976 40,083 Accumulated provision for uncollectible accounts (4,749) (4,117) Refundable income taxes 18,106 17,997 Fossil fuel stock, at average cost 93,396 84,582 Materials and supplies, at average cost 174,964 167,637 Other 88,978 46,011 ------------------ ------------------ Total current assets 843,045 848,332 ------------------ ------------------ Property, Plant, and Equipment: In service 11,867,549 11,783,078 Less accumulated provision for depreciation 4,960,488 4,901,384 ------------------ ------------------ 6,907,061 6,881,694 Nuclear fuel, at amortized cost 97,781 106,836 Construction work in progress 788,994 715,153 ------------------ ------------------ Total property, plant, and equipment 7,793,836 7,703,683 ------------------ ------------------ Other Property and Investments: Equity investments in unconsolidated subsidiaries 33,179 34,891 Nuclear decommissioning trusts 281,192 286,653 Other 14,790 12,156 ------------------ ------------------ Total other property and investments 329,161 333,700 ------------------ ------------------ Deferred Charges and Other Assets: Deferred charges related to income taxes 328,843 330,405 Prepaid pension costs 226,731 213,971 Debt expense, being amortized 9,401 9,563 Premium on reacquired debt, being amortized 81,902 83,895 Department of Energy assessments 27,685 27,685 Other 100,392 97,470 ------------------ ------------------ Total deferred charges and other assets 774,954 762,989 ------------------ ------------------ Total Assets $9,740,996 $9,648,704 ================== ================== The accompanying notes as they relate to ALABAMA are an integral part of these condensed statements.
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ALABAMA POWER COMPANY CONDENSED BALANCE SHEETS At March 31, 2000 At December 31, Liabilities and Stockholders' Equity (Unaudited) 1999 ------------------ ------------------ (in thousands) Current Liabilities: Securities due within one year $ 903 $100,943 Notes payable 371,695 96,824 Accounts payable -- Affiliated 81,506 91,315 Other 98,193 140,842 Customer deposits 33,100 31,704 Taxes accrued -- Income taxes 146,490 100,569 Other 35,439 18,295 Interest accrued 38,467 26,365 Vacation pay accrued 30,112 30,112 Other 35,978 84,267 ------------------ ------------------ Total current liabilities 871,883 721,236 ------------------ ------------------ Long-term debt 3,189,401 3,190,378 ------------------ ------------------ Deferred Credits and Other Liabilities: Accumulated deferred income taxes 1,237,375 1,240,344 Deferred credits related to income taxes 260,807 265,102 Accumulated deferred investment tax credits 257,556 260,367 Employee benefits provisions 83,342 82,298 Prepaid capacity revenues 74,574 79,703 Other 148,834 155,901 ------------------ ------------------ Total deferred credits and other liabilities 2,062,488 2,083,715 ------------------ ------------------ Company obligated mandatorily redeemable preferred securities of subsidiary trusts holding company junior subordinated notes 347,000 347,000 ------------------ ------------------ Cumulative preferred stock 317,512 317,512 ------------------ ------------------ Common Stockholder's Equity: Common stock, par value $40 per share -- Authorized - 6,000,000 shares Outstanding - 5,608,955 shares Par value 224,358 224,358 Paid-in capital 1,538,992 1,538,992 Premium on preferred stock 99 99 Retained earnings 1,189,263 1,225,414 ------------------ ------------------ Total common stockholder's equity 2,952,712 2,988,863 ------------------ ------------------ Total Liabilities and Stockholder's Equity $9,740,996 $9,648,704 ================== ================== The accompanying notes as they relate to ALABAMA are an integral part of these condensed statements.
21 ALABAMA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FIRST QUARTER 2000 vs. FIRST QUARTER 1999 RESULTS OF OPERATIONS Earnings ALABAMA's net income after dividends on preferred stock for the first quarter of 2000 was $67.5 million compared to $63.1 million for the corresponding period of 1999. First quarter earnings increased $4.4 million or 7% primarily due to an increase in operating revenues, which was partially offset by an increase in operating expenses. Significant income statement items appropriate for discussion include the following: Increase (Decrease) ---------------------------------- First Quarter ---------------------------------- (in thousands) % Retail sales................................ $38,226 6.7 Sales for resale--non-affiliates............ 10,566 12.3 Sales for resale - affiliates .............. (18,432) (39.1) Purchased power - non-affiliates............ 11,292 149.0 Maintenance expense......................... 6,060 8.6 Interest income............................. (3,520) (37.3) Interest on long-term debt.................. 6,992 15.5 Other interest charges, net................. (5,016) (82.4) Retail sales. Excluding fuel revenues, which generally do not affect net income, retail sales revenues increased for the first quarter 2000 due primarily to a 3.1% increase in retail energy sales. Retail energy sales increased by 2.3%, 7.5% and 1.5% to residential, commercial and industrial customers, respectively. Sales for resale-non-affiliates. Increased revenues from unit power energy sales was the primary reason for the increase in the first quarter 2000 as compared to the same period in 1999. Energy is usually sold at variable cost and has no significant impact on net income. Sales for resale-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. These transactions did not have a significant impact on earnings. Purchased power - non-affiliates. Increased amounts of purchased power were needed to meet territorial demand in the first quarter of 2000 to offset decreased nuclear and hydro power generation related to a refueling outage and lower stream flows, respectively. Maintenance expense. These expenses increased due primarily to maintenance performed on the fossil and nuclear power generation facilities. 22 ALABAMA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Interest income. This item was lower for the first quarter of 2000 when compared to the first quarter of 1999 due primarily to a decrease in recognized gains on investments held by the nuclear decommissioning trust. Interest income related to the nuclear decommissioning trust was offset by a concurrent reduction of other interest charges in accordance with FERC requirements. Interest on long-term debt. This first quarter 2000 increase compared to the same period in 1999 is primarily due to the issuance of senior notes during the last half of 1999. Other interest charges, net. The decrease in other interest charges for the first quarter 2000 is primarily attributable to an increase in Allowance for Funds Used During Construction resulting in a larger credit to interest expense than was recorded in the corresponding period for 1999. Also, there was a decrease in interest charges related to the nuclear decommissioning trust, which was offset by a concurrent reduction of interest income in accordance with FERC requirements. 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 weather to 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, ALABAMA 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. On December 20, 1999, the FERC issued its final rule on RTOs. Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings Potential" of ALABAMA in the Form 10-K for information on this matter. Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Environmental Matters" and Note 3 to the financial statements of ALABAMA in the Form 10-K for information on EPA litigation. The FASB has issued Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, which must be adopted by January 2001. This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. ALABAMA has not yet quantified the impact of adopting this statement on its financial statements; however, the adoption could increase volatility in earnings. Reference is made to Notes (B), (C), (F), (G) and (O) in the "Notes to the Condensed Financial Statements" herein for discussion of various contingencies and other matters which may affect future earnings potential. 23 ALABAMA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FINANCIAL CONDITION Overview Major changes in ALABAMA's financial condition during the first three months of 2000 included the addition of approximately $193.9 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 2000, maturities of first mortgage bonds by ALABAMA totaled $100 million. 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, 2000, approximately $18.8 million of cash and cash equivalents and had unused committed lines of credit of approximately $907 million (including $418 million of such lines under which borrowings may be made only to fund purchase obligations relating to variable rate pollution control bonds). ALABAMA has regulatory authority for up to $750 million of short-term borrowings. At March 31, 2000, ALABAMA had outstanding $322 million of commercial paper and $50 million of extendible commercial notes. 24 Exhibit 1 ARTHUR ANDERSEN 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, 2000, and the related condensed statements of income for the three-month periods ended March 31, 2000 and 1999 and cash flows for the three-month periods ended March 31, 2000 and 1999. 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 auditing standards generally accepted in the United States, 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 accounting principles generally accepted in the United States. We have previously audited, in accordance with auditing standards generally accepted in the United States, the balance sheet of ALABAMA POWER COMPANY as of December 31, 1999 (not presented herein) and, in our report dated February 16, 2000, 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, 1999 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 9, 2000 25 GEORGIA POWER COMPANY 26
GEORGIA POWER COMPANY CONDENSED STATEMENTS OF INCOME (UNAUDITED) For the Three Months Ended March 31, 2000 1999 ---------------- ---------------- (in thousands) Operating Revenues: Retail sales $909,028 $861,777 Sales for resale -- Non-affiliates 43,689 41,755 Affiliates 11,933 7,906 Other revenues 26,989 19,492 ---------------- ---------------- Total operating revenues 991,639 930,930 ---------------- ---------------- Operating Expenses: Operation -- Fuel 210,907 178,212 Purchased power -- Non-affiliates 43,110 32,158 Affiliates 47,740 54,921 Other 158,983 168,282 Maintenance 98,133 91,536 Depreciation and amortization 157,767 132,435 Taxes other than income taxes 51,613 49,002 ---------------- ---------------- Total operating expenses 768,253 706,546 ---------------- ---------------- Operating Income 223,386 224,384 Other Income (Expense): Interest income 408 250 Equity in earnings of unconsolidated subsidiaries 853 733 Other, net (6,225) (6,637) ---------------- ---------------- Earnings Before Interest and Income Taxes 218,422 218,730 ---------------- ---------------- Interest Charges and Other: Interest on long-term debt 38,872 41,111 Interest on notes payable 8,155 4,216 Amortization of debt discount, premium and expense, net 2,710 3,700 Other interest charges, net (2,760) 1,129 Distributions on preferred securities of subsidiary 14,776 14,971 ---------------- ---------------- Total interest charges and other, net 61,753 65,127 ---------------- ---------------- Earnings Before Income Taxes 156,669 153,603 Income taxes 62,800 60,821 ---------------- ---------------- Net Income 93,869 92,782 Dividends on Preferred Stock 170 1,201 ---------------- ---------------- Net Income After Dividends on Preferred Stock $ 93,699 $ 91,581 ================ ================ The accompanying notes as they relate to GEORGIA are an integral part of these condensed statements.
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GEORGIA POWER COMPANY CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Three Months Ended March 31, 2000 1999 --------------- ---------------- (in thousands) Operating Activities: Net income $93,869 $92,782 Adjustments to reconcile net income to net cash provided from operating activities -- Depreciation and amortization 165,288 149,086 Deferred income taxes and investment tax credits, net (11,679) (1,894) Other, net 28,602 7,003 Changes in certain current assets and liabilities -- Receivables, net 48,673 86,184 Fossil fuel stock 7,412 (37,135) Materials and supplies (1,361) (613) Accounts payable (65,168) (90,358) Energy cost recovery, retail (9,930) 10,997 Other (3,060) (28,486) --------------- ---------------- Net cash provided from operating activities 252,646 187,566 --------------- ---------------- Investing Activities: Gross property additions (212,360) (163,030) Other (74,899) (26,920) --------------- ---------------- Net cash used for investing activities (287,259) (189,950) --------------- ---------------- Financing Activities: Increase (decrease) in notes payable, net (50,097) 97,308 Proceeds -- Other long-term debt 300,000 100,000 Preferred securities - 200,000 Retirements -- First mortgage bonds (100,000) (204,000) Preferred stock (279) (35,679) Payment of preferred stock dividends (125) 38 Payment of common stock dividends (136,500) (133,100) Other (43) (20,576) --------------- ---------------- Net cash provided from financing activities 12,956 3,991 --------------- ---------------- Net Change in Cash and Cash Equivalents (21,657) 1,607 Cash and Cash Equivalents at Beginning of Period 34,660 16,272 --------------- ---------------- Cash and Cash Equivalents at End of Period $13,003 $17,879 =============== ================ Supplemental Cash Flow Information: Cash paid during the period for -- Interest (net of amount capitalized) $56,096 $65,971 Income taxes (net of refunds) $1,604 $18,929 The accompanying notes as they relate to GEORGIA are an integral part of these condensed statements.
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GEORGIA POWER COMPANY CONDENSED BALANCE SHEETS At March 31, 2000 At December 31, Assets (Unaudited) 1999 ------------------ ------------------- (in thousands) Current Assets: Cash and cash equivalents $ 13,003 $ 34,660 Receivables -- Customer accounts receivable 386,894 438,161 Other accounts and notes receivable 94,317 102,544 Affiliated companies 15,341 16,006 Accumulated provision for uncollectible accounts (5,100) (7,000) Fossil fuel stock, at average cost 118,886 126,298 Materials and supplies, at average cost 255,255 253,894 Other 71,645 63,990 ------------------ ------------------- Total current assets 950,241 1,028,553 ------------------ ------------------- Property, Plant, and Equipment: In service 15,850,589 15,798,624 Less accumulated provision for depreciation 6,666,595 6,538,574 ------------------ ------------------- 9,183,994 9,260,050 Nuclear fuel, at amortized cost 106,287 119,288 Construction work in progress 563,929 425,975 ------------------ ------------------- Total property, plant, and equipment 9,854,210 9,805,313 ------------------ ------------------- Other Property and Investments: Equity investments in unconsolidated subsidiaries 23,305 25,024 Nuclear decommissioning trusts 422,542 371,914 Other 36,467 33,766 ------------------ ------------------- Total other property and investments 482,314 430,704 ------------------ ------------------- Deferred Charges and Other Assets: Deferred charges related to income taxes 584,264 590,893 Prepaid pension costs 159,486 145,801 Debt expense, being amortized 55,239 55,824 Premium on reacquired debt, being amortized 97,303 99,331 Other 126,894 120,441 ------------------ ------------------- Total deferred charges and other assets 1,023,186 1,012,290 ------------------ ------------------- ------------------ ------------------- Total Assets $12,309,951 $12,276,860 ================== =================== The accompanying notes as they relate to GEORGIA are an integral part of these condensed statements.
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GEORGIA POWER COMPANY CONDENSED BALANCE SHEETS At March 31, 2000 At December 31, Liabilities and Stockholder's Equity (Unaudited) 1999 ------------------ ------------------- (in thousands) Current Liabilities: Securities due within one year $ 56,056 $155,772 Notes payable and commercial paper 586,144 636,241 Accounts payable -- Affiliated 68,510 76,591 Other 251,542 346,785 Customer deposits 76,388 74,695 Taxes accrued -- Income taxes 80,789 7,914 Other 50,596 127,414 Interest accrued 61,612 58,665 Vacation pay accrued 37,927 38,143 Other 154,316 153,767 ------------------ ------------------- Total current liabilities 1,423,880 1,675,987 ------------------ ------------------- Long-term debt 2,988,038 2,688,358 ------------------ ------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 2,192,520 2,202,565 Deferred credits related to income taxes 262,430 267,083 Accumulated deferred investment tax credits 363,414 367,114 Employee benefits provisions 185,314 181,529 Other 195,023 151,812 ------------------ ------------------- Total deferred credits and other liabilities 3,198,701 3,170,103 ------------------ ------------------- Company obligated mandatorily redeemable preferred securities of subsidiary trusts holding company junior subordinated notes 789,250 789,250 ------------------ ------------------- Preferred stock 14,673 14,952 ------------------ ------------------- Common stockholder's equity Common stock, without par value-- Authorized - 15,000,000 shares Outstanding - 7,761,500 shares 344,250 344,250 Paid-in capital 1,815,983 1,815,983 Premium on preferred stock 40 40 Retained earnings 1,735,136 1,777,937 ------------------ ------------------- Total common stockholder's equity 3,895,409 3,938,210 ------------------ ------------------- Total Liabilities and Stockholder's Equity $12,309,951 $12,276,860 ================== =================== The accompanying notes as they relate to GEORGIA are an integral part of these condensed statements.
30 GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FIRST QUARTER 2000 vs. FIRST QUARTER 1999 RESULTS OF OPERATIONS Earnings GEORGIA's net income after dividends on preferred stock for the first quarter of 2000 was $93.7 million compared to $91.6 million for the corresponding period in 1999. This $2.1 million or 2.3% increase in first quarter earnings was primarily due to higher revenues and lower interest charges, partially offset by higher depreciation and amortization expense. Significant income statement items appropriate for discussion include the following: Increase (Decrease) ---------------------------------- First Quarter ---------------------------------- (in thousands) % Retail sales............................. $47,251 5.5 Sales for resale - affiliates............ 4,027 50.9 Other operating revenues................. 7,497 38.5 Fuel expense............................. 32,695 18.3 Purchased power from non-affiliates ..... 10,952 34.1 Purchased power from affiliates.......... (7,181) (13.1) Other operation expense.................. (9,299) (5.5) Maintenance expense...................... 6,597 7.2 Depreciation and amortization expense.... 25,332 19.1 Interest on long-term debt............... (2,239) (5.4) Retail sales. Retail sales revenues, excluding fuel revenues which generally do not affect income, increased $17.5 million during the first quarter of 2000 when compared to the same period in 1999 due primarily to a 4.7% increase in retail energy sales. This increase had no significant effect on earnings due to additional depreciation and amortization under GEORGIA's retail rate order as discussed below. Sales for resale - affiliates and Purchased power from affiliates. Revenues from sales for resale 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 did not have a significant impact on earnings. Other operating revenues. This first quarter increase is mainly due to recognition of the open-access transmission tariff settlement in 1999. Fuel expense. The increase in this expense for the first quarter 2000, when compared to the corresponding period of 1999, is primarily a result of increased generation to meet energy demands and lower hydro generation in 2000 when compared to 1999. 31 GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Purchased power from non-affiliates. The first quarter of 2000 increase when compared to the same period of 1999 results from higher demand for energy. Other operation expense. For the current quarter of 2000 these expenses decreased when compared to the corresponding period in 1999 due primarily to lower injuries and damages claims and a larger nuclear insurance refund. Maintenance expense. These costs increased during the first quarter of 2000 as compared to the first quarter of 1999 due primarily to maintenance performed on nuclear plant and distribution lines. Depreciation and amortization expense. The increase in this first quarter when compared to the same period in 1999 is a result of increased plant and equipment in service and accelerated amortization and depreciation required under the three-year rate order which became effective in January 1, 1999. See Note (H) in the "Notes to the Condensed Financial Statements" herein for further details regarding the retail rate order. Interest on long-term debt. The decrease in this charge during the first quarter of 2000 compared to the same period in 1999 is primarily due to the refinancing of higher cost debt. 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 weather, 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, GEORGIA 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. Effective January 1, 1999, GEORGIA began operating under a new three-year retail rate order. Under the order, GEORGIA's earnings are evaluated against a retail return on common equity range of 10% to 12.5%. In compliance with the order, retail rates were decreased by $24 million on an annual basis effective January 1, 2000. Reference is made to Note (H) in the "Notes to the Condensed Financial Statements" herein and Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings Potential" of GEORGIA in the Form 10-K for additional information. Effective June 1, 2000, the Georgia PSC will modify the calculation of prices under certain of GEORGIA's retail commercial and industrial rates. These modifications will reduce retail revenues by approximately $14 million in 2000 and $20 million in 2001. Compliance costs related to the Clean Air Act and other environmental issues could affect earnings. For additional information, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Environmental Issues" of GEORGIA in the Form 10-K. 32 GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The FASB issued Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, which must be adopted by January 2001. This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts - and for hedging activities. GEORGIA has not yet quantified the impact of adopting this statement on its financial statements; however, the adoption could increase volatility in earnings. Reference is made to Notes (B), (C), (H), (I) and (O) 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 2000 was the addition of approximately $212 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 2000, maturities of first mortgage bonds by GEORGIA totaled $100 million. In February 2000, GEORGIA issued $300 million of floating rate senior notes due February 22, 2002. The proceeds of the sale were used to repay a portion of its outstanding short-term indebtedness. 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. 33 GEORGIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION To meet short-term cash needs and contingencies, GEORGIA had at March 31, 2000, approximately $13 million of cash and cash equivalents and approximately $1.5 billion of unused credit arrangements with banks. The credit arrangements provide liquidity support to GEORGIA's obligations with respect to variable rate pollution control bonds and its commercial paper program. At March 31, 2000, GEORGIA had $134.8 million and $451.3 million outstanding in short-term notes payable to banks and commercial paper, respectively. Management believes that the need for working capital can be adequately met by utilizing lines of credit without maintaining large cash balances. 34 Arthur Andersen 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, 2000, and the related condensed statements of income for the three-month periods ended March 31, 2000 and 1999 and cash flows for the three-month periods ended March 31, 2000 and 1999. 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 auditing standards generally accepted in the United States, 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 accounting principles generally accepted in the United States. We have previously audited, in accordance with auditing standards generally accepted in the United States, the balance sheet of GEORGIA POWER COMPANY as of December 31, 1999 (not presented herein), and, in our report dated February 16, 2000, 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, 1999, 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 9, 2000 35 GULF POWER COMPANY 36
GULF POWER COMPANY CONDENSED STATEMENTS OF INCOME (UNAUDITED) For the Three Months Ended March 31, 2000 1999 --------------- -------------- ------------------------------ (in thousands) Operating Revenues: Retail sales $116,807 $107,281 Sales for resale -- Non-affiliates 10,978 11,194 Affiliates 8,667 7,071 Other revenues 2,046 8,960 --------------- -------------- Total operating revenues 138,498 134,506 --------------- -------------- Operating Expenses: Operation -- Fuel 41,643 38,753 Purchased power -- Non-affiliates 6,614 4,156 Affiliates 3,158 3,575 Other 27,188 27,142 Maintenance 14,176 16,593 Depreciation and amortization 16,367 16,078 Taxes other than income taxes 13,345 12,544 --------------- -------------- Total operating expenses 122,491 118,841 --------------- -------------- Operating Income 16,007 15,665 Other Income (Expense): Interest income 438 241 Other, net (504) (812) --------------- -------------- Earnings Before Interest and Income Taxes 15,941 15,094 --------------- -------------- Interest Charges and Other: Interest on long-term debt 5,620 4,950 Interest on notes payable 773 485 Amortization of debt discount, premium and expense, net 503 498 Other interest charges, net 172 278 Distributions on preferred securities of subsidiary 1,550 1,550 --------------- -------------- Total interest charges and other, net 8,618 7,761 --------------- -------------- Earnings Before Income Taxes 7,323 7,333 Income taxes 2,616 2,480 --------------- -------------- Net Income 4,707 4,853 Dividends on Preferred Stock 54 54 --------------- -------------- Net Income After Dividends on Preferred Stock $4,653 $4,799 =============== ============== The accompanying notes as they relate to GULF are an integral part of these condensed statements.
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GULF POWER COMPANY CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Three Months Ended March 31, 2000 1999 --------------- --------------- (in thousands) Operating Activities: Net income $4,707 $4,853 Adjustments to reconcile net income to net cash provided from operating activities -- Depreciation and amortization 17,342 17,026 Deferred income taxes and investment tax credits, net (3,587) (1,060) Other, net (725) 6,015 Changes in certain current assets and liabilities -- Receivables, net 10,856 8,090 Fossil fuel stock (5,319) (17,544) Materials and supplies 925 152 Accounts payable (782) (5,832) Other 7,185 (2,859) --------------- --------------- Net cash provided from operating activities 30,602 8,841 --------------- --------------- Investing Activities: Gross property additions (18,605) (12,529) Other (8,795) (9,962) --------------- --------------- Net cash used for investing activities (27,400) (22,491) --------------- --------------- Financing Activities: Increase (decrease) in notes payable, net (2,500) 28,500 Retirements -- Other long-term debt (20) - Payment of preferred stock dividends (54) (54) Payment of common stock dividends (14,600) (15,000) Other (22) (5) --------------- --------------- Net cash provided from (used for) financing activities (17,196) 13,441 --------------- --------------- Net Change in Cash and Cash Equivalents (13,994) (209) Cash and Cash Equivalents at Beginning of Period 15,753 969 --------------- --------------- Cash and Cash Equivalents at End of Period $1,759 $760 =============== =============== Supplemental Cash Flow Information: Cash paid during the period for -- Interest (net of amount capitalized) $9,762 $7,219 Income taxes (net of refunds) - - The accompanying notes as they relate to GULF are an integral part of these condensed statements.
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GULF POWER COMPANY CONDENSED BALANCE SHEETS At March 31, 2000 At December 31, Assets (Unaudited) 1999 ---------------- ---------------- (in thousands) Current Assets: Cash and cash equivalents $ 1,759 $ 15,753 Receivables -- Customer accounts receivable 46,096 55,108 Other accounts and notes receivable 5,542 4,325 Affiliated companies 4,034 7,104 Accumulated provision for uncollectible accounts (1,017) (1,026) Fossil fuel stock, at average cost 35,188 29,869 Materials and supplies, at average cost 29,163 30,088 Regulatory clauses under recovery 7,666 11,611 Other 7,115 5,354 ---------------- ---------------- Total current assets 135,546 158,186 ---------------- ---------------- Property, Plant, and Equipment: In service 1,861,262 1,853,664 Less accumulated provision for depreciation 837,043 821,970 ---------------- ---------------- 1,024,219 1,031,694 Construction work in progress 44,030 34,164 ---------------- ---------------- Total property, plant, and equipment 1,068,249 1,065,858 ---------------- ---------------- Other Property and Investments 4,468 1,481 ---------------- ---------------- Deferred Charges and Other Assets: Deferred charges related to income taxes 16,960 25,264 Prepaid pension costs 19,051 17,734 Debt expense, being amortized 2,510 2,526 Premium on reacquired debt, being amortized 16,981 17,360 Other 21,799 20,086 ---------------- ---------------- Total deferred charges and other assets 77,301 82,970 ---------------- ---------------- Total Assets $1,285,564 $1,308,495 ================ ================ The accompanying notes as they relate to GULF are an integral part of these condensed statements.
39
GULF POWER COMPANY CONDENSED BALANCE SHEETS At March 31, 2000 At December 31, Liabilities and Stockholder's Equity (Unaudited) 1999 ---------------- ---------------- (in thousands) Current Liabilities: Notes payable $ 52,500 $ 55,000 Accounts payable -- Affiliated 11,105 14,878 Other 20,871 22,581 Customer deposits 12,990 12,778 Taxes accrued -- Income taxes 11,028 4,889 Other 6,981 7,707 Interest accrued 7,609 9,255 Vacation pay accrued 4,199 4,199 Other 5,434 4,961 ---------------- ---------------- Total current liabilities 132,717 136,248 ---------------- ---------------- ---------------- ---------------- Long-term debt 367,515 367,449 ---------------- ---------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 160,338 162,776 Deferred credits related to income taxes 40,856 49,693 Accumulated deferred investment tax credits 27,232 27,712 Employee benefits provisions 32,802 31,735 Other 22,502 21,333 ---------------- ---------------- Total deferred credits and other liabilities 283,730 293,249 ---------------- ---------------- Company obligated mandatorily redeemable preferred securities of subsidiary trusts holding company junior subordinated notes 85,000 85,000 ---------------- ---------------- Preferred stock 4,236 4,236 ---------------- ---------------- Common stockholder's equity Common stock, without par value-- Authorized - 992,717 shares Outstanding - 992,717 shares 38,060 38,060 Paid-in capital 221,254 221,254 Premium on preferred stock 12 12 Retained earnings 153,040 162,987 ---------------- ---------------- Total common stockholder's equity 412,366 422,313 ---------------- ---------------- Total Liabilities and Stockholder's Equity $1,285,564 $1,308,495 ================ ================ The accompanying notes as they relate to GULF are an integral part of these condensed statements.
40 GULF POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FIRST QUARTER 2000 vs. FIRST QUARTER 1999 RESULTS OF OPERATIONS Earnings GULF's net income after dividends on preferred stock for the first quarter of 2000 was $4.7 million compared to $4.8 million for the same period in 1999. The slight decrease in earnings was primarily due to an increase in total interest charges and other, net. Significant income statement items appropriate for discussion include the following: Increase (Decrease) ---------------------------------- First Quarter --------------------------------- (in thousands) % Retail sales................................ 9,526 8.9 Sales for resale - affiliates............... 1,596 22.6 Other operating revenues.................... (6,914) (77.2) Fuel expense................................ 2,890 7.5 Purchased power from non-affiliates ........ 2,458 59.1 Maintenance expense......................... (2,417) (14.6) Interest on long-term debt.................. 670 13.5 Retail sales. Excluding recovery of fuel expense and certain other expenses that do not effect net income, retail sales revenues remained relatively flat during the first quarter of 2000 when compared to the first quarter of 1999. Retail energy sales increased 5.3% during the first three months of 2000 when compared to the same period of the prior year due, mostly, to growth in the number of retail customers served by GULF. Retail energy sales to residential, commercial and industrial customers were up 5.4%, 5.3% and 4.8%, respectively. This increase in energy sales was offset, for the most part, by retail base rate reductions and the recording of estimated revenues to be shared under GULF's Sharing Plan, which was approved by the Florida PSC in October 1999. For additional information regarding the reduction to retail base rates and the Sharing Plan, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings Potential" of GULF in the Form 10-K. Sales for resale - affiliates. Revenues from sales for resale 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. These transactions do not have a significant impact on earnings. Other operating revenues. This decrease in the first quarter of 2000 when compared to the same period in 1999 is mainly due to a decrease in fuel, conservation and capacity clause revenues. The decrease in these revenues was a result of adjustments to reflect differences between recoverable costs and the amounts actually reflected in current rates. The recovery provisions generally equal the related expenses and have no material effect on net income. Fuel expense. The increase in fuel expense for the first three months of 2000 when compared to the same period in 1999 can be attributed, for the most part, to increased generation due to a higher demand for energy and a higher average cost of fuel consumed. 41 GULF POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Purchased power from non-affiliates. This increase in the first quarter 2000 when compared to the same period in 1999 is attributed primarily to an increase in energy purchases due to increased power marketing activities, the majority of which were resold to non-affiliated third parties. These transactions had no significant effect on net income. Maintenance expense. These expenses decreased in the first quarter of 2000 when compared to the first quarter of 1999 mainly due to scheduled outages during the first quarter of 1999. Interest on long-term debt. This increase for the first quarter of 2000 is primarily due to the sale of senior notes during the third quarter of 1999. 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 weather to 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, GULF 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. On November 4, 1999, the Florida PSC approved GULF's plan to reduce its authorized rate of return, reduce retail base rates and share revenues with its customers. For additional information, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings Potential" of GULF in the Form 10-K. On December 20, 1999, the FERC issued its final rule on RTOs. Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings Potential" of GULF in the Form 10-K for information on this matter. Reference is also made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Environmental Protection Agency Litigation" and Note 3 to the financial statements of GULF in the Form 10-K for information on EPA litigation. The FASB issued Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, which must be adopted by January 2001. This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. GULF has not yet quantified the impact of adopting this statement on its financial statements; however, the adoption could increase volatility in earnings. 42 GULF POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Reference is made to Notes (B) and (O) 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 GULF's financial condition during the first three months of 2000 included the addition of approximately $18.6 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 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, 2000, approximately $1.8 million of cash and cash equivalents and $41.5 million of unused committed lines of credit with banks in addition to $61.9 million liquidity support for GULF's obligations with respect to variable rate pollution control bonds. At March 31, 2000, GULF had $52.5 million outstanding of notes payable to banks. Management believes that the need for working capital can be adequately met by utilizing lines of credit without maintaining large cash balances. 43 MISSISSIPPI POWER COMPANY 44
MISSISSIPPI POWER COMPANY CONDENSED STATEMENTS OF INCOME (UNAUDITED) For the Three Months Ended March 31, 2000 1999 ------------------------------ (in thousands) Operating Revenues: Retail sales $100,962 $92,018 Sales for resale -- Non-affiliates 26,562 27,229 Affiliates 4,581 1,035 Other revenues 2,600 2,153 --------------- -------------- Total operating revenues 134,705 122,435 --------------- -------------- Operating Expenses: Operation -- Fuel 37,060 31,522 Purchased power -- Non-affiliates 4,008 2,345 Affiliates 11,622 8,902 Other 26,731 27,047 Maintenance 12,937 11,601 Depreciation and amortization 11,713 11,789 Taxes other than income taxes 12,041 11,107 --------------- -------------- Total operating expenses 116,112 104,313 --------------- -------------- Operating Income 18,593 18,122 Other Income: Interest income 99 81 Other, net 354 634 --------------- -------------- Earnings Before Interest and Income Taxes 19,046 18,837 --------------- -------------- Interest Charges and Other: Interest on long-term debt 5,424 5,010 Interest on notes payable 1,045 412 Amortization of debt discount, premium and expense, net 357 356 Other interest charges, net 128 82 Distributions on preferred securities of subsidiary 699 699 --------------- -------------- Total interest charges and other, net 7,653 6,559 --------------- -------------- Earnings Before Income Taxes 11,393 12,278 Income taxes 4,168 4,582 --------------- -------------- Net Income 7,225 7,696 Dividends on Preferred Stock 503 503 --------------- -------------- Net Income After Dividends on Preferred Stock $6,722 $ 7,193 =============== ============== The accompanying notes as they relate to MISSISSIPPI are an integral part of these condensed statements.
45
MISSISSIPPI POWER COMPANY CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Three Months Ended March 31, 2000 1999 -------------- --------------- (in thousands) Operating Activities: Net income $7,225 $7,696 Adjustments to reconcile net income to net cash provided from operating activities -- Depreciation and amortization 12,826 12,801 Deferred income taxes and investment tax credits, net (7,811) (991) Other, net (1,402) (2,927) Changes in certain current assets and liabilities -- Receivables, net 18,649 2,570 Fossil fuel stock 3,999 (6,173) Materials and supplies (371) 64 Accounts payable (4,542) (8,912) Other (11,490) (19,332) -------------- --------------- Net cash provided from (used for) operating activities 17,083 (15,204) -------------- --------------- Investing Activities: Gross property additions (16,372) (12,897) Other (5,881) (6,314) -------------- --------------- Net cash used for investing activities (22,253) (19,211) -------------- --------------- Financing Activities: Increase (decrease) in notes payable, net (30,500) 48,500 Proceeds -- Other long-term debt 100,000 - Retirements -- Other long-term debt (50,208) - Payment of preferred stock dividends (503) (503) Payment of common stock dividends (13,600) (13,800) Other - - -------------- --------------- Net cash provided from financing activities 5,189 34,197 -------------- --------------- Net Change in Cash and Cash Equivalents 19 (218) Cash and Cash Equivalents at Beginning of Period 173 1,327 -------------- --------------- Cash and Cash Equivalents at End of Period $192 $1,109 ============== =============== Supplemental Cash Flow Information: Cash paid during the period for -- Interest (net of amount capitalized) $5,882 $4,543 Income taxes (net of refunds) $73 $1,900 The accompanying notes as they relate to MISSISSIPPI are an integral part of these condensed statements.
46
MISSISSIPPI POWER COMPANY CONDENSED BALANCE SHEETS At March 31, 2000 At December 31, Assets (Unaudited) 1999 ---------------- ---------------- (in thousands) Current Assets: Cash and cash equivalents $ 192 $ 173 Receivables -- Customer accounts receivable 49,093 61,274 Other accounts and notes receivable 29,920 23,490 Affiliated companies 2,953 16,097 Accumulated provision for uncollectible accounts (451) (697) Fossil fuel stock, at average cost 21,798 25,797 Materials and supplies, at average cost 21,009 20,638 Other 16,860 10,013 ---------------- ---------------- Total current assets 141,374 156,785 ---------------- ---------------- Property, Plant, and Equipment: In service 1,611,082 1,601,399 Less accumulated provision for depreciation 637,816 626,841 ---------------- ---------------- 973,266 974,558 Construction work in progress 74,238 68,721 ---------------- ---------------- Total property, plant, and equipment 1,047,504 1,043,279 ---------------- ---------------- Other Property and Investments 1,898 1,389 ---------------- ---------------- Deferred Charges and Other Assets: Deferred charges related to income taxes 14,569 21,557 Prepaid pension costs 3,428 2,488 Debt expense, being amortized 4,314 4,355 Premium on reacquired debt, being amortized 7,866 8,154 Other 19,053 13,129 ---------------- ---------------- Total deferred charges and other assets 49,230 49,683 ---------------- ---------------- Total Assets $1,240,006 $1,251,136 ================ ================ The accompanying notes as they relate to MISSISSIPPI are an integral part of these condensed statements.
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MISSISSIPPI POWER COMPANY CONDENSED BALANCE SHEETS At March 31, 2000 At December 31, Liabilities and Stockholders' Equity (Unaudited) 1999 ---------------- ---------------- (in thousands) Current Liabilities: Securities due within one year $ 30,020 $ 30,020 Notes payable 27,000 57,500 Accounts payable -- Affiliated 13,908 17,002 Other 37,506 43,105 Customer deposits 4,077 3,749 Taxes accrued -- Income taxes 19,818 6,865 Other 11,841 35,534 Interest accrued 7,452 6,733 Vacation pay accrued 5,218 5,218 Other 8,446 7,497 ---------------- ---------------- Total current liabilities 165,286 213,223 ---------------- ---------------- Long-term debt 371,623 321,802 ---------------- ---------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 136,180 139,564 Deferred credits related to income taxes 27,433 34,765 Accumulated deferred investment tax credits 24,391 24,695 Employee benefits provisions 34,694 34,268 Workforce reduction plan 10,882 11,272 Other 17,618 12,770 ---------------- ---------------- Total deferred credits and other liabilities 251,198 257,334 ---------------- ---------------- Company obligated mandatorily redeemable preferred securities of subsidiary trust holding company junior subordinated notes 35,000 35,000 ---------------- ---------------- Preferred stock 31,809 31,809 ---------------- ---------------- Common stockholder's equity Common stock, par value $40 per share -- Authorized - 6,000,000 shares Outstanding - 5,608,955 shares Par value 37,691 37,691 Paid-in capital 181,502 181,502 Premium on preferred stock 326 326 Retained earnings 165,571 172,449 ---------------- ---------------- Total common stockholder's equity 385,090 391,968 ---------------- ---------------- Total Liabilities and Stockholder's Equity $1,240,006 $1,251,136 ================ ================ The accompanying notes as they relate to MISSISSIPPI are an integral part of these condensed statements.
48 MISSISSIPPI POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FIRST QUARTER 2000 vs. FIRST QUARTER 1999 RESULTS OF OPERATIONS Earnings MISSISSIPPI's net income after dividends on preferred stock for the first quarter of 2000 was $6.7 million compared to $7.2 million for the corresponding period of 1999. Earnings during this first quarter of 2000 were down as a 10% increase in operating revenues was offset by a 11.3% increase in operating expenses and a 16.7% increase in total interest charges and other, net. Significant income statement items appropriate for discussion include the following: Increase (Decrease) ------------------------------- First Quarter ------------------------------- (in thousands) % Retail sales................................ $8,944 9.7 Sales for resale - affiliates............... 3,546 342.6 Other operating revenues.................... 447 20.8 Fuel expense................................ 5,538 17.6 Purchased power from non-affiliates ........ 1,663 70.9 Purchased power from affiliates............. 2,720 30.6 Maintenance expense......................... 1,336 11.5 Interest on notes payable................... 633 153.6 Retail sales. Retail sales revenues were up in the first quarter due to a 9.9% increase in retail energy sales which resulted from growth in the number of customers. Energy sales to residential, commercial and industrial customers during the first quarter of 2000 when compared to the same period in 1999 were up 4.8%, 9.7% and 12.4%, respectively. Sales for resale - affiliates and Purchased power from affiliates. Revenues from sales for resale to affiliated companies, as well as 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. These transactions do not have a significant impact on earnings. Other operating revenues. The increase in these revenues primarily reflects increased revenues from the transmission of electricity for others. Fuel expense. During the first quarter of 2000 compared to the same period in 1999, fuel expense increased due to higher demand for energy. Purchased power from non-affiliates. The increase in the current quarter when compared to the same period in 1999 is reflective of increased demand for energy. 49 MISSISSIPPI POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Maintenance expense. This expense was up during the first quarter of 2000 as compared to the corresponding period of 1999 principally due to additional maintenance performed on steam power generation facilities. Interest on notes payable. This item has increased due primarily to increased borrowing at higher interest rates during the first quarter of 2000 compared to the same period in 1999. 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 weather to 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. For additional information, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings Potential" of MISSISSIPPI in the Form 10-K. See Note (J) in the "Notes to the Condensed Financial Statements" herein for information regarding an agreement between MISSISSIPPI and certain of its wholesale customers to reduce rates. With the enactment of the Energy Act and new legislation being discussed at federal and state levels to expand customer choice, MISSISSIPPI 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 2000 ECO Plan filing was approved, as filed, by the Mississippi PSC on March 22, 2000 and resulted in a slight 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. On December 20, 1999, the FERC issued its final rule on RTOs. Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings Potential" of MISSISSIPPI in the Form 10-K for information on this matter. Reference is also made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Environmental Matters" and Note 3 to the financial statements of MISSISSIPPI in the Form 10-K for information on EPA litigation. In May 2000, the Mississippi PSC ordered that its docket reviewing restructuring of the electric industry in the State of Mississippi be suspended. The Mississippi PSC found that retail competition may not be in the public interest at this time and ordered that no further formal hearings would be held on this subject. It found that the current regulatory structure had produced reliable low cost power and "should not be changed without clear and convincing demonstration that change would be in the public interest." The Mississippi PSC will continue to monitor retail and wholesale restructuring activities throughout the United States and reserved "its right to order further formal hearings on the matter should new evidence demonstrate that retail competition would be in the public interest and all customers could receive a reduction in the total cost of their electric service." 50 MISSISSIPPI POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The FASB issued Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, which must be adopted by January 2001. This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. MISSISSIPPI has not yet quantified the impact of adopting this statement on its financial statements; however, the adoption could increase volatility in earnings. Reference is made to Notes (B), (J) and (O) 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 2000 included the addition of approximately $16.4 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. Financing Activities In March 2000, MISSISSIPPI issued $100 million of floating rate senior notes due March 28, 2002. The proceeds were used to prepay bank loans of $45 million maturing in November 2001 and $5 million maturing in October 2002. The balance was applied to repay a portion of its outstanding short-term indebtedness. MISSISSIPPI plans to continue, to the extent possible, a program to retire higher-cost debt 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" and Note 3 to the financial statements 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, 2000, approximately $192 thousand of cash and cash equivalents and approximately $124.3 million of unused committed credit arrangements with banks. At March 31, 2000, MISSISSIPPI had short-term notes payable outstanding of $27 million. Management believes that the need for working capital can be adequately met by utilizing lines of credit without maintaining large cash balances. 51 SAVANNAH ELECTRIC AND POWER COMPANY 52
SAVANNAH ELECTRIC AND POWER COMPANY CONDENSED STATEMENTS OF INCOME (UNAUDITED) For the Three Months Ended March 31, 2000 1999 ------------------------------ (in thousands) Operating Revenues: Retail sales $49,785 $45,807 Sales for resale -- Non-affiliates 569 468 Affiliates 1,721 366 Other revenues 315 457 --------------- -------------- Total operating revenues 52,390 47,098 --------------- -------------- Operating Expenses: Operation -- Fuel 9,747 6,593 Purchased power -- Non-affiliates 2,188 1,092 Affiliates 8,050 9,177 Other 11,803 11,279 Maintenance 4,666 4,439 Depreciation and amortization 6,309 5,977 Taxes other than income taxes 3,044 2,904 --------------- -------------- Total operating expenses 45,807 41,461 --------------- -------------- Operating Income 6,583 5,637 Other Income (Expense): Interest income 41 36 Other, net (386) (423) --------------- -------------- Earnings Before Interest and Income Taxes 6,238 5,250 --------------- -------------- Interest Charges and Other: Interest on long-term debt 2,272 2,475 Interest on notes payable 453 21 Amortization of debt discount, premium and expense, net 240 233 Other interest charges, net 56 65 Distributions on preferred securities of subsidiary 685 685 --------------- -------------- Total interest charges and other, net 3,706 3,479 --------------- -------------- Earnings Before Income Taxes 2,532 1,771 Income taxes 889 562 --------------- -------------- Net Income $ 1,643 $ 1,209 =============== ============== The accompanying notes as they relate to SAVANNAH are an integral part of these condensed statements.
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SAVANNAH ELECTRIC AND POWER COMPANY CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Three Months Ended March 31, 2000 1999 --------------- --------------- (in thousands) Operating Activities: Net income $1,643 $1,209 Adjustments to reconcile net income to net cash provided from operating activities -- Depreciation and amortization 6,777 6,438 Deferred income taxes and investment tax credits, net (1,342) (555) Other, net 1,563 1,308 Changes in certain current assets and liabilities -- Receivables, net 2,753 2,913 Fossil fuel stock 955 195 Materials and supplies (588) (543) Accounts payable 2,364 (4,064) Other (731) (8) --------------- --------------- Net cash provided from operating activities 13,394 6,893 --------------- --------------- Investing Activities: Gross property additions (7,049) (9,398) Other, net (2,683) 175 --------------- --------------- Net cash used for investing activities (9,732) (9,223) --------------- --------------- Financing Activities: Increase (decrease) in notes payable, net (400) 6,500 Retirements -- Other long-term debt (182) (182) Payment of common stock dividends (6,100) (6,200) Other - (12) --------------- --------------- Net cash provided from (used for) financing activities (6,682) 106 --------------- --------------- Net Change in Cash and Cash Equivalents (3,020) (2,224) Cash and Cash Equivalents at Beginning of Period 6,553 5,962 --------------- --------------- Cash and Cash Equivalents at End of Period $3,533 $3,738 =============== =============== Supplemental Cash Flow Information: Cash paid during the period for -- Interest (net of amount capitalized) $2,170 $3,209 Income taxes (net of refunds) 920 - The accompanying notes as they relate to SAVANNAH are an integral part of these condensed statements.
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SAVANNAH ELECTRIC AND POWER COMPANY CONDENSED BALANCE SHEETS At March 31, 2000 At December 31, Assets (Unaudited) 1999 ----------------- ------------------ (in thousands) Current Assets: Cash and cash equivalents $ 3,533 $ 6,553 Receivables -- Customer accounts receivable 21,096 20,752 Unrecovered retail fuel clause revenue 17,999 21,089 Other accounts and notes receivable 3,638 3,505 Affiliated companies 1,051 1,195 Accumulated provision for uncollectible accounts (233) (237) Fossil fuel stock, at average cost 6,154 7,109 Materials and supplies, at average cost 8,990 8,402 Other 1,443 2,869 ----------------- ------------------ Total current assets 63,671 71,237 ----------------- ------------------ Property, Plant, and Equipment: In service 807,396 804,096 Less accumulated provision for depreciation 365,752 360,639 ----------------- ------------------ 441,644 443,457 Construction work in progress 10,235 6,561 ----------------- ------------------ Total property, plant, and equipment 451,879 450,018 ----------------- ------------------ Other Property and Investments 1,982 1,506 ----------------- ------------------ Deferred Charges and Other Assets: Deferred charges related to income taxes 15,719 16,063 Cash surrender value of life insurance for deferred compensation plans 16,305 16,305 Prepaid pension costs 601 1,201 Debt expense, being amortized 3,118 3,155 Premium on reacquired debt, being amortized 8,183 8,385 Other 2,254 2,348 ----------------- ------------------ Total deferred charges and other assets 46,180 47,457 ----------------- ------------------ Total Assets $563,712 $570,218 ================= ================== The accompanying notes as they relate to SAVANNAH are an integral part of these condensed statements.
55
SAVANNAH ELECTRIC AND POWER COMPANY CONDENSED BALANCE SHEETS At March 31, 2000 At December 31, Liabilities and Stockholders' Equity (Unaudited) 1999 ----------------- ------------------ (in thousands) Current Liabilities: Securities due within one year $ 688 $ 704 Notes payable 33,900 34,300 Accounts payable -- Affiliated 4,869 4,632 Other 11,930 11,118 Customer deposits 5,490 5,426 Taxes accrued -- Income taxes 786 3,046 Other 2,354 3,013 Interest accrued 4,551 3,237 Vacation pay accrued 2,163 2,142 Other 3,439 5,742 ----------------- ------------------ Total current liabilities 70,170 73,360 ----------------- ------------------ Long-term debt 146,981 147,147 ----------------- ------------------ Deferred Credits and Other Liabilities: Accumulated deferred income taxes 80,841 80,318 Deferred credits related to income taxes 19,143 19,687 Accumulated deferred investment tax credits 11,114 11,280 Deferred compensation plans 10,860 10,624 Employee benefits provisions 8,149 7,805 Other 6,064 5,150 ----------------- ------------------ Total deferred credits and other liabilities 136,171 134,864 ----------------- ------------------ Company obligated mandatorily redeemable preferred securities of subsidiary trusts holding company junior subordinated notes 40,000 40,000 ----------------- ------------------ Common stockholder's equity Common stock, par value $5 per share -- Authorized - 16,000,000 shares Outstanding - 10,844,635 shares Par value 54,223 54,223 Paid-in capital 9,787 9,787 Retained earnings 106,380 110,837 ----------------- ------------------ Total common stockholder's equity 170,390 174,847 ----------------- ------------------ Total Liabilities and Stockholder's Equity $563,712 $570,218 ================= ================== The accompanying notes as they relate to SAVANNAH are an integral part of these condensed statements.
56 SAVANNAH ELECTRIC AND POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FIRST QUARTER 2000 vs. FIRST QUARTER 1999 RESULTS OF OPERATIONS Earnings SAVANNAH's net income after dividends on preferred stock for the first quarter of 2000 was $1.6 million as compared to $1.2 million for the corresponding period of 1999. First quarter 2000 earnings were up due primarily to increased operating revenues. Significant income statement items appropriate for discussion include the following: Increase (Decrease) ------------------------------- First Quarter ------------------------------- (in thousands) % Retail sales............................. $3,978 8.7 Sales for resale - affiliates............ 1,355 370.2 Fuel expense............................. 3,154 47.8 Purchased power from non-affiliates...... 1,096 100.4 Purchased power from affiliates.......... (1,127) (12.3) Interest on notes payable................ 432 N/M N/M - Not meaningful Retail sales. Retail sales revenues were higher in the first quarter of 2000 than in the same period of the prior year due to an 8% increase in retail energy sales. Energy sales to residential, commercial and industrial customers were up by 8.4%, 9.9% and 5.8%, respectively. These energy sales increases were a direct result of growth in the number of customers. Sales for resale - affiliates and Purchased power from affiliates. Revenues from sales for resale 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. Fuel expense. This first quarter 2000 increase over the corresponding period in 1999 is principally due to increased demand for energy and increased use of higher cost fuel. Purchased power from non-affiliates. This expense increased in the first quarter of 2000 reflecting the increased demand for energy and increased costs for purchased power. Interest on notes payable. For the first quarter of 2000, these expenses increased from the same period in 1999 due primarily to SAVANNAH's purchase during 1999 of long-term fixed rate debt with the proceeds from lower cost short-term debt. This short-term debt is being carried until there is a favorable opportunity to refinance. 57 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 weather to energy sales growth to a less regulated, more competitive environment. In 1998, the Georgia PSC approved a four-year accounting order for SAVANNAH. Reference is made to Note (K) in the "Notes to the Condensed Financial Statements" herein and Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings Potential" of SAVANNAH in the Form 10-K for additional information. With the enactment of the Energy Act and new legislation being discussed at federal and state levels to expand customer choice, SAVANNAH 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. On December 20, 1999, the FERC issued its final rule on RTOs. Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings Potential" of SAVANNAH in the Form 10-K for information on this matter. Reference is also made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Environmental Matters" and Note 3 to the financial statements of SAVANNAH in the Form 10-K for information on EPA litigation. The FASB issued Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, which must be adopted by January 2001. This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. SAVANNAH has not yet quantified the impact of adopting this statement on its financial statements; however, the adoption could increase volatility in earnings. Reference is made to Notes (B), (K) and (O) in the "Notes to the Condensed Financial Statements" herein for discussion of various contingencies and other matters which may affect future earnings potential. 58 SAVANNAH ELECTRIC AND POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FINANCIAL CONDITION Overview Major changes in SAVANNAH's financial condition during the first three months of 2000 included the addition of approximately $7 million to utility plant. The funds for these additions and other capital requirements were derived primarily from operations and credit arrangements with banks. See SAVANNAH's Condensed Statements of Cash Flows for further details. Financing Activities 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. To meet short-term cash needs and contingencies, SAVANNAH had at March 31, 2000, approximately $3.5 million of cash and cash equivalents and approximately $42.1 million of unused credit arrangements with banks. At March 31, 2000, SAVANNAH had $33.9 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. 59 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, L, M, N, O ALABAMA A, B, C, F, G, O GEORGIA A, B, C, H, I, O GULF A, B, O MISSISSIPPI A, B, J, O SAVANNAH A, B, K, O 60 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 necessary to present fairly the results of operations for the periods ended March 31, 2000 and 1999. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States 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 of each registrant be read in conjunction with the financial statements of such registrant and the notes thereto included in the Form 10-K. Certain prior period amounts have been reclassified to conform with current period presentation. Due to seasonal variations in the demand for energy, operating results for the periods presented do not necessarily indicate operating results for the entire year. 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 obligations related to the retirement 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 exchange rate fluctuations. At March 31, 2000, the status of outstanding non-trading related derivative contracts was as follows: 61 NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
Year of Maturity or Notional Unrecognized Type Termination Amount Gain (Loss) ---- ------------ ------ ----------- (in thousands) Interest rate swaps 2000-2012 $1,971,846 $(1,066) 2001-2012 (pound)600,000 $(46,093) 2002-2007 DM691,000 $(5,141) Cross currency swaps 2001-2007 (pound)394,300 $5,274 Cross currency swaption 2003 DM435,000 $22,041 (pound) - Denotes British pounds sterling. DM - Denotes Deutschemark.
In January 1998, Southern Energy and Vastar Resources, Inc. combined their energy trading and marketing activities to form a joint venture. Southern Energy's investment in the joint venture is accounted for under the equity method of accounting. SOUTHERN and Vastar have made guarantees to certain counterparties regarding performance of contractual commitments by the joint venture. At March 31, 2000, outstanding guarantees related to the estimated fair value of net contractual commitments were approximately $196.8 million. Reference is made to MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings Potential" of SOUTHERN in Item 7 and Notes 1 and 5 to the financial statements of SOUTHERN under the captions "Financial Instruments for Trading Activities" and "Energy Trading and Marketing Commitments", respectively, in Item 8 of the Form 10-K. (E) SOUTHERN's principal business segment -- or its traditional business -- is the five integrated Southeast utilities that provide electric service in four 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. Intersegment revenues are not material. Financial data for business segments for the periods covered in the Form 10-Q are as follows:
Integrated All Southeast Southern Other Reconciling Utilities Energy (Note) Eliminations Consolidated ------------ ---------- --------- ------------- --------------- Three Months Ended March 31, 2000: Operating revenues $ 2,005 $ 521 $ 57 $ (10) $ 2,573 Segment net income (loss) 176 101 (29) (3) 245 Total assets at March 31, 2000 25,399 13,945 399 (1,291) 38,452 ----------------------------------------- ------------ ---------- --------- ------------- --------------- Three Months Ended March 31, 1999: Operating revenues $ 1,882 $ 522 $ 43 $ (5) $ 2,442 Segment net income (loss) 168 88 (33) 1 224 Total assets at December 31, 1999 25,251 13,872 440 (1,189) 38,374 ------------------------------------------ ----------- ---------- --------- ------------- ----------------
62 NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued) (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. Amounts for Southern Energy exclude interest expense to parent SOUTHERN. (F) 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. (G) 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 a judgment against ALABAMA arising from discharges into Lake Martin. (H) 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 rate order approved by the Georgia PSC effective January 1, 1999. The order decreased annual retail rates by $262 million effective January 1, 1999 and by an additional $24 million effective January 1, 2000. The order further provides for $85 million each year, plus up to $50 million annually of any earnings in excess of a 12.5% retail return on common equity during the second and third years, to be applied to accelerated amortization or depreciation of assets. Two-thirds of any additional earnings above the 12.5% return will be applied to rate reductions and the remaining one-third retained by GEORGIA. Pursuant to this provision, GEORGIA recognized accelerated amortization of $36.6 million in the first quarter of 2000 and $21.3 million in the first quarter of 1999. (I) 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. (J) In April 2000, MISSISSIPPI reached an agreement with certain of its wholesale customers to reduce its rates effective January 1, 2000. The agreement results in an annual rate reduction of approximately $3 million and a temporary annualized rate reduction of approximately $3 million for a period of 18 months ending June 30, 2001. MISSISSIPPI and its customers will file the agreement with the FERC for its approval. In anticipation of FERC approval, MISSISSIPPI recognized a liability for approximately $1.5 million in revenues subject to refund during the first quarter ended March 31, 2000 related to energy delivered during the first quarter. In addition, MISSISSIPPI and its customers agreed that neither party would seek a unilateral change to the new rates prior to January 1, 2002, except for changes due to the operation of the fuel cost adjustment clause under the tariff. (K) In 1998, the Georgia PSC approved a new accounting order for SAVANNAH. Under this order, SAVANNAH will reduce electric rates to its small business customers, expense additional storm damage accruals and accrue additional depreciation on generating assets. For additional information concerning the four-year accounting order approved by the Georgia PSC in June 1998, reference is made to Note 3 to the financial statements of SAVANNAH in Item 8 of the Form 10-K. 63 NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued) (L) Reference is made to Note 3 to the financial statements of SOUTHERN in Item 8 and to Legal Proceedings in Item 3 of the Form 10-K for information relating to (i) petitions for Chapter 11 bankruptcy relief which were filed in the U. S. Bankruptcy Court for the Southern District of Alabama and (ii) proposed settlement discussions among the affected parties. At March 31, 2000, Mobile Energy had total assets of $391.9 million and senior debt outstanding of $190 million of first mortgage bonds and $72.2 million related to tax-exempt bonds. In connection with the bond financings, SOUTHERN provided certain limited guarantees, in lieu of funding debt service and maintenance reserve accounts with cash. As of March 31, 2000, under an agreement with the bondholders, SOUTHERN had paid $38.3 million pursuant to the guarantees. SOUTHERN continues to have guarantees outstanding of certain potential environmental and other obligations of Mobile Energy that represent a maximum contingent liability of $21 million at March 31, 2000. The final outcome of this matter cannot now be determined. (M) In April 1999, SOUTHERN's board approved the repurchase of up to 50 million shares of SOUTHERN's common stock over the next two years through open market or privately negotiated transactions. The program did not establish a target stock price or timetable for specific repurchases. As of March 31, 2000, a total of 50 million shares had been purchased, thus completing the program. (N) On April 17, 2000, SOUTHERN announced that its board of directors approved an initial public offering of up to 19.9 percent of its Southern Energy subsidiary. SOUTHERN also announced that it is planning to spin-off to holders of SOUTHERN common stock the remaining ownership of Southern Energy within 12 months of the initial public offering. The spin-off will be subject to a number of market and other conditions. Reference is made to SOUTHERN's Current Report on Form 8-K dated April 17, 2000 for additional information. On April 21, 2000, Southern Energy filed a registration statement with the SEC for the initial public offering of Southern Energy shares. The offering is expected to take place as soon as practicable after the effective date of the registration statement. (O) Reference is made to Note 3 to the financial statements of SOUTHERN, ALABAMA , GEORGIA, GULF, MISSISSIPPI and SAVANNAH in Item 8 of the Form 10-K for information on EPA Litigation. 64 PART II - OTHER INFORMATION Item 1. Legal Proceedings. (1) An administrative law judge held hearings in March 2000 in connection with a FERC proceeding that will determine the percentage of a settled $158.8 million revenue requirement for the period from June 1, 1999 through December 31, 2001 to be paid to Southern Energy California, L.L.C. and its subsidiaries (collectively, "SE California") under reliability must-run agreements between SE California and the California Independent System Operator ("CAISO"). SE California has proposed to allocate approximately 75% of the responsibility for payment of the revenue requirement to the CAISO, while CAISO and other aligned parties argue that CAISO should pay no more than approximately 7%. The outcome of this proceeding cannot now be determined. (2) 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. -------- Exhibits 15 - Letter re: unaudited interim financial information (a) ALABAMA (b) GEORGIA Exhibit 24 - (a) Powers of Attorney and resolutions. (Designated in the Form 10-K for the year ended December 31, 1999, 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 Schedule (a) SOUTHERN (b) ALABAMA (c) GEORGIA (d) GULF (e) MISSISSIPPI (f) SAVANNAH 65 Item 6. Exhibits and Reports on Form 8-K. (Continued) (b) Reports on Form 8-K. ------------------- GEORGIA filed a Current Report on Form 8-K dated February 15, 2000: Items reported: Item 5 Item 7 Financial statements filed: None SOUTHERN, ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH filed Current Reports on Form 8-K dated February 16, 2000: Items reported: Item 7 Financial statements filed: Each registrant's audited financial statements for the year ended December 31, 1999. MISSISSIPPI filed a Current Report on Form 8-K dated March 22, 2000: Items reported: Item 5 Item 7 Financial statements filed: None 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. THE SOUTHERN COMPANY By A. W. Dahlberg Chairman 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 12, 2000 - -------------------------------------------------------------------------------- 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 12, 2000 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. GEORGIA POWER COMPANY By David M. Ratcliffe President and Chief Executive Officer (Principal Executive Officer) By Thomas A. Fanning Executive Vice President, Treasurer and Chief Financial Officer (Principal Financial Officer) By /s/ Wayne Boston (Wayne Boston, Attorney-in-fact) Date: May 12, 2000 - ------------------------------------------------------------------------------ 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 12, 2000 68 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 12, 2000 - ------------------------------------------------------------------------------- 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 12, 2000 69 EX-15.A 2 ARTHUR ANDERSEN LLP Arthur Andersen EXHIBIT 15(a) May 9, 2000 Alabama Power Company 600 North 18th Street Birmingham, Alabama 35291 Ladies and Gentlemen: We are aware that Alabama Power Company has incorporated by reference in Registration Statement 333-67453 its Form 10-Q for the quarter ended March 31, 2000 which includes our report on Alabama Power Company dated May 9, 2000 covering the unaudited interim financial information contained therein. Pursuant to Regulation C of the Securities Act of 1933 (the "Act"), such report is not considered a part of the Registration Statement prepared or certified by our firm or a report prepared or certified by our firm within the meaning of Sections 7 and 11 of the Act. Very truly yours, /s/ Arthur Andersen LLP EX-15.B 3 ARTHUR ANDERSEN LLP Arthur Andersen EXHIBIT 15(b) May 9, 2000 Georgia Power Company 241 Ralph McGill Boulevard, NE Atlanta, Georgia 30308 Ladies and Gentlemen: We are aware that Georgia Power Company has incorporated by reference in Registration Statement 333-75193 its Form 10-Q for the quarter ended March 31, 2000 which includes our report on Georgia Power Company dated May 9, 2000 covering the unaudited interim financial information contained therein. Pursuant to Regulation C of the Securities Act of 1933 (the "Act"), such report is not considered a part of the Registration Statement prepared or certified by our firm or a report prepared or certified by our firm within the meaning of Sections 7 and 11 of the Act. Very truly yours, /s/ Arthur Andersen LLP EX-27.A 4 SOUTHERN FINANCIAL DATA SCHEDULE
UT This schedule contains summary financial information extracted from the Form 10-Q for March 31, 2000, and is qualified in its entirety by reference to such financial statements. 0000092122 THE SOUTHERN COMPANY 1,000 3-MOS Dec-31-2000 Mar-31-2000 PER-BOOK 24,693,341 7,983,542 3,313,986 2,460,645 0 38,451,514 3,503,110 1,146,911 4,161,910 8,811,931 2,326,015 368,230 3,933,881 2,192,324 8,113,176 2,333,872 376,372 0 93,567 2,547 9,899,599 38,451,514 2,572,587 61,510 2,003,211 2,003,211 569,376 95,141 603,007 352,868 250,139 4,695 245,444 220,557 0 336,147 0.38 0.38
EX-27.B 5 ALABAMA FINANCIAL DATA SCHEDULE
UT This schedule contains summary financial information extracted from the Form 10-Q for March 31, 2000, and is qualified in its entirety by reference to such financial statements. 0000003153 ALABAMA POWER COMPANY 1,000 3-MOS Dec-31-2000 Mar-31-2000 PER-BOOK 7,793,836 329,161 843,045 774,954 0 9,740,996 224,358 1,539,091 1,189,263 2,952,712 347,000 317,512 988,056 0 2,197,383 371,695 0 0 3,962 903 2,561,773 9,740,996 746,177 40,641 574,515 574,515 171,662 5,703 136,724 65,244 71,480 3,968 67,512 103,600 0 130,065 0 0
EX-27.C 6 GEORGIA FINANCIAL DATA SCHEDULE
UT This schedule contains summary financial information extracted from the Form 10-Q for March 31, 2000, and is qualified in its entirety by reference to such financial statements. 0000041091 GEORGIA POWER COMPANY 1,000 3-MOS Dec-31-2000 Mar-31-2000 PER-BOOK 9,854,210 482,314 950,241 1,023,186 0 12,309,951 344,250 1,816,023 1,735,136 3,895,409 789,250 14,673 2,008,259 134,800 895,000 451,344 55,100 0 84,779 956 3,980,381 12,309,951 991,639 62,800 768,253 768,253 223,386 (4,964) 155,622 61,753 93,869 170 93,699 136,500 0 252,646 0 0
EX-27.D 7 GULF FINANCIAL DATA SCHEDULE
UT This schedule contains summary financial information extracted from the Form 10-Q for March 31, 2000, and is qualified in its entirety by reference to such financial statements. 0000044545 GULF POWER COMPANY 1,000 3-MOS Dec-31-2000 Mar-31-2000 PER-BOOK 1,068,249 4,468 135,546 77,301 0 1,285,564 38,060 221,266 153,040 412,366 85,000 4,236 247,609 52,500 119,906 0 0 0 0 0 363,947 1,285,564 138,498 2,616 122,491 122,491 16,007 (66) 13,325 8,618 4,707 54 4,653 14,600 0 30,602 0 0
EX-27.E 8 MISSISSIPPI FINANCIAL DATA SCHEDULE
UT This schedule contains summary financial information extracted from the Form 10-Q for March 31, 2000, and is qualified in its entirety by reference to such financial statements. 0000066904 MISSISSIPPI POWER COMPANY 1,000 3-MOS Dec-31-2000 Mar-31-2000 PER-BOOK 1,047,504 1,898 141,374 49,230 0 1,240,006 37,691 181,828 165,571 385,090 35,000 31,809 182,267 27,000 189,356 0 30,020 0 0 0 359,464 1,240,006 134,705 4,168 116,112 116,112 18,593 453 14,878 7,653 7,225 503 6,722 13,600 0 17,083 0 0
EX-27.F 9 SAVANNAH FINANCIAL DATA SCHEDULE
UT This schedule contains summary financial information extracted from the Form 10-Q for March 31, 2000, and is qualified in its entirety by reference to such financial statements. 0000086940 SAVANNAH ELECTRIC AND POWER COMPANY 1,000 3-MOS Dec-31-2000 Mar-31-2000 PER-BOOK 451,879 1,982 63,671 46,180 0 563,712 54,223 9,787 106,380 170,390 40,000 0 82,155 33,900 60,000 0 0 0 4,826 688 171,753 563,712 52,390 889 45,807 45,807 6,583 (345) 5,349 3,706 1,643 0 1,643 6,100 0 13,394 0 0
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