Date of Report (Date of earliest event reported) | January 1, 2019 |
Commission File Number | Registrant, State of Incorporation, Address And Telephone Number | I.R.S. Employer Identification No. |
1-3526 | The Southern Company (A Delaware Corporation) 30 Ivan Allen Jr. Boulevard, N.W. Atlanta, Georgia 30308 (404) 506-5000 | 58-0690070 |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Date: January 4, 2019 | THE SOUTHERN COMPANY | |||
By | /s/Melissa K. Caen | |||
Melissa K. Caen Assistant Secretary |
• | Gulf Power Company (Gulf Power), sold on January 1, 2019; |
• | Southern Company - Oleander LLC (Oleander) and Southern Company - Florida LLC (Stanton) (owned by Southern Power Company), sold on December 4, 2018; and |
• | Pivotal Utility Holdings, Inc. (PUHI), including its Florida City Gas business (owned by Southern Company Gas), sold on July 31, 2018. |
• | the consolidated financial statements of Southern Company as of and for the year ended December 31, 2017 included in Southern Company’s Annual Report on Form 10-K for the year ended December 31, 2017; and |
• | the consolidated financial statements of Southern Company as of and for the nine months ended September 30, 2018 included in Southern Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018. |
Southern Company | Divestitures | Pro Forma Adjustments | Pro Forma | ||||||||||||
(in millions) | |||||||||||||||
Operating Revenues: | |||||||||||||||
Retail electric revenues | $ | 11,913 | $ | (932 | ) | $ | — | $ | 10,981 | ||||||
Wholesale electric revenues | 1,923 | (183 | ) | — | 1,740 | ||||||||||
Other electric revenues | 509 | (50 | ) | — | 459 | ||||||||||
Natural gas revenues | 2,806 | (56 | ) | — | 2,750 | ||||||||||
Other revenues | 1,007 | — | — | 1,007 | |||||||||||
Total operating revenues | 18,158 | (1,221 | ) | — | 16,937 | ||||||||||
Operating Expenses: | |||||||||||||||
Fuel | 3,514 | (305 | ) | — | 3,209 | ||||||||||
Purchased power | 760 | (135 | ) | — | 625 | ||||||||||
Cost of natural gas | 1,053 | (16 | ) | — | 1,037 | ||||||||||
Cost of other sales | 688 | — | — | 688 | |||||||||||
Other operations and maintenance | 4,217 | (273 | ) | — | 3,944 | ||||||||||
Depreciation and amortization | 2,338 | (156 | ) | — | 2,182 | ||||||||||
Taxes other than income taxes | 990 | (97 | ) | — | 893 | ||||||||||
Estimated loss on plants under construction | 1,105 | — | — | 1,105 | |||||||||||
(Gain) loss on dispositions, net | (317 | ) | — | 121 | (a) | (196 | ) | ||||||||
Impairment charges | 197 | — | (119 | ) | (b) | 78 | |||||||||
Total operating expenses | 14,545 | (982 | ) | 2 | 13,565 | ||||||||||
Operating Income | 3,613 | (239 | ) | (2 | ) | 3,372 | |||||||||
Other Income and (Expense): | |||||||||||||||
Allowance for equity funds used during construction | 99 | — | — | 99 | |||||||||||
Earnings from equity method investments | 108 | — | — | 108 | |||||||||||
Interest expense, net of amounts capitalized | (1,386 | ) | 42 | 79 | (c) | (1,265 | ) | ||||||||
Other income (expense), net | 195 | 2 | — | 197 | |||||||||||
Total other income and (expense) | (984 | ) | 44 | 79 | (861 | ) | |||||||||
Earnings Before Income Taxes | 2,629 | (195 | ) | 77 | 2,511 | ||||||||||
Income taxes | 598 | (11 | ) | (51 | ) | (d) | 536 | ||||||||
Consolidated Net Income | 2,031 | (184 | ) | 128 | 1,975 | ||||||||||
Dividends on preferred and preference stock of subsidiaries | 12 | — | — | 12 | |||||||||||
Net income attributable to noncontrolling interests | 71 | — | — | 71 | |||||||||||
Consolidated Net Income Attributable to Southern Company | $ | 1,948 | $ | (184 | ) | $ | 128 | $ | 1,892 | ||||||
Common Stock Data: | |||||||||||||||
Earnings per share - | |||||||||||||||
Basic | $ | 1.92 | $ | 1.86 | |||||||||||
Diluted | $ | 1.91 | $ | 1.85 | |||||||||||
Average number of shares of common stock outstanding (in millions) | |||||||||||||||
Basic | 1,016 | 1,016 | |||||||||||||
Diluted | 1,021 | 1,021 |
Southern Company | Divestitures | Pro Forma Adjustments | Pro Forma | ||||||||||||
(in millions) | |||||||||||||||
Operating Revenues: | |||||||||||||||
Retail electric revenues | $ | 15,330 | $ | (1,281 | ) | $ | — | $ | 14,049 | ||||||
Wholesale electric revenues | 2,426 | (243 | ) | — | 2,183 | ||||||||||
Other electric revenues | 681 | (70 | ) | — | 611 | ||||||||||
Natural gas revenues | 3,791 | (87 | ) | — | 3,704 | ||||||||||
Other revenues | 803 | — | — | 803 | |||||||||||
Total operating revenues | 23,031 | (1,681 | ) | — | 21,350 | ||||||||||
Operating Expenses: | |||||||||||||||
Fuel | 4,400 | (427 | ) | — | 3,973 | ||||||||||
Purchased power | 863 | (156 | ) | — | 707 | ||||||||||
Cost of natural gas | 1,601 | (32 | ) | — | 1,569 | ||||||||||
Cost of other sales | 513 | — | — | 513 | |||||||||||
Other operations and maintenance | 5,481 | (431 | ) | — | 5,050 | ||||||||||
Depreciation and amortization | 3,010 | (167 | ) | — | 2,843 | ||||||||||
Taxes other than income taxes | 1,250 | (123 | ) | — | 1,127 | ||||||||||
Estimated loss on plants under construction | 3,362 | — | — | 3,362 | |||||||||||
Total operating expenses | 20,480 | (1,336 | ) | — | 19,144 | ||||||||||
Operating Income | 2,551 | (345 | ) | — | 2,206 | ||||||||||
Other Income and (Expense): | |||||||||||||||
Allowance for equity funds used during construction | 160 | — | — | 160 | |||||||||||
Earnings from equity method investments | 106 | — | — | 106 | |||||||||||
Interest expense, net of amounts capitalized | (1,694 | ) | 55 | 106 | (c) | (1,533 | ) | ||||||||
Other income (expense), net | (55 | ) | 9 | — | (46 | ) | |||||||||
Total other income and (expense) | (1,483 | ) | 64 | 106 | (1,313 | ) | |||||||||
Earnings Before Income Taxes | 1,068 | (281 | ) | 106 | 893 | ||||||||||
Income taxes | 142 | (108 | ) | 41 | (d) | 75 | |||||||||
Consolidated Net Income | 926 | (173 | ) | 65 | 818 | ||||||||||
Less: | |||||||||||||||
Dividends on preferred and preference stock of subsidiaries | 38 | (4 | ) | — | 34 | ||||||||||
Net income attributable to noncontrolling interests | 46 | — | — | 46 | |||||||||||
Consolidated Net Income Attributable to Southern Company | $ | 842 | $ | (169 | ) | $ | 65 | $ | 738 | ||||||
Common Stock Data: | |||||||||||||||
Earnings per share - | |||||||||||||||
Basic | $ | 0.84 | $ | 0.74 | |||||||||||
Diluted | $ | 0.84 | $ | 0.73 | |||||||||||
Average number of shares of common stock outstanding (in millions) | |||||||||||||||
Basic | 1,000 | 1,000 | |||||||||||||
Diluted | 1,008 | 1,008 |
Southern Company | Divestitures | Pro Forma Adjustments | Pro Forma | |||||||||||||
Assets | (in millions) | |||||||||||||||
Current Assets: | ||||||||||||||||
Cash and cash equivalents | $ | 1,847 | $ | 4,619 | (e) | $ | (3,850 | ) | (g) | $ | 2,616 | |||||
Receivables — | ||||||||||||||||
Customer accounts receivable | 1,730 | — | — | 1,730 | ||||||||||||
Energy marketing receivables | 498 | — | — | 498 | ||||||||||||
Unbilled revenues | 738 | — | — | 738 | ||||||||||||
Under recovered fuel clause revenues | 105 | — | — | 105 | ||||||||||||
Other accounts and notes receivable | 690 | — | — | 690 | ||||||||||||
Accumulated provision for uncollectible accounts | (33 | ) | — | — | (33 | ) | ||||||||||
Materials and supplies | 1,418 | — | — | 1,418 | ||||||||||||
Fossil fuel for generation | 390 | — | — | 390 | ||||||||||||
Natural gas for sale | 486 | — | — | 486 | ||||||||||||
Prepaid expenses | 354 | — | — | 354 | ||||||||||||
Other regulatory assets, current | 522 | — | — | 522 | ||||||||||||
Assets held for sale, current | 407 | (407 | ) | — | — | |||||||||||
Other current assets | 232 | 75 | (f) | — | 307 | |||||||||||
Total current assets | 9,384 | 4,287 | (3,850 | ) | 9,821 | |||||||||||
Property, Plant, and Equipment: | ||||||||||||||||
In service | 100,672 | — | — | 100,672 | ||||||||||||
Less: Accumulated depreciation | 30,739 | — | — | 30,739 | ||||||||||||
Plant in service, net of depreciation | 69,933 | — | — | 69,933 | ||||||||||||
Nuclear fuel, at amortized cost | 844 | — | — | 844 | ||||||||||||
Construction work in progress | 7,655 | — | — | 7,655 | ||||||||||||
Total property, plant, and equipment | 78,432 | — | — | 78,432 | ||||||||||||
Other Property and Investments: | ||||||||||||||||
Goodwill | 5,315 | — | — | 5,315 | ||||||||||||
Equity investments in unconsolidated subsidiaries | 1,569 | — | — | 1,569 | ||||||||||||
Other intangible assets, net of amortization | 674 | — | — | 674 | ||||||||||||
Nuclear decommissioning trusts, at fair value | 1,872 | — | — | 1,872 | ||||||||||||
Leveraged leases | 794 | — | — | 794 | ||||||||||||
Miscellaneous property and investments | 258 | — | — | 258 | ||||||||||||
Total other property and investments | 10,482 | — | — | 10,482 | ||||||||||||
Deferred Charges and Other Assets: | ||||||||||||||||
Deferred charges related to income taxes | 792 | — | — | 792 | ||||||||||||
Unamortized loss on reacquired debt | 328 | — | — | 328 | ||||||||||||
Other regulatory assets, deferred | 6,196 | — | — | 6,196 | ||||||||||||
Assets held for sale | 4,667 | (4,667 | ) | — | — | |||||||||||
Other deferred charges and assets | 1,436 | — | — | 1,436 | ||||||||||||
Total deferred charges and other assets | 13,419 | (4,667 | ) | — | 8,752 | |||||||||||
Total Assets | $ | 111,717 | $ | (380 | ) | $ | (3,850 | ) | $ | 107,487 |
Southern Company | Divestitures | Pro Forma Adjustments | Pro Forma | |||||||||||||
Liabilities and Stockholders' Equity | (in millions) | |||||||||||||||
Current Liabilities: | ||||||||||||||||
Securities due within one year | $ | 3,013 | $ | — | $ | — | $ | 3,013 | ||||||||
Notes payable | 2,564 | — | — | 2,564 | ||||||||||||
Energy marketing trade payables | 521 | — | — | 521 | ||||||||||||
Accounts payable | 2,246 | — | — | 2,246 | ||||||||||||
Customer deposits | 524 | — | — | 524 | ||||||||||||
Accrued taxes | 1,060 | 728 | (h) | — | 1,788 | |||||||||||
Accrued interest | 422 | — | — | 422 | ||||||||||||
Accrued compensation | 800 | — | — | 800 | ||||||||||||
Asset retirement obligations, current | 348 | — | — | 348 | ||||||||||||
Other regulatory liabilities, current | 349 | — | — | 349 | ||||||||||||
Liabilities held for sale, current | 355 | (355 | ) | — | — | |||||||||||
Other current liabilities | 763 | — | — | 763 | ||||||||||||
Total current liabilities | 12,965 | 373 | — | 13,338 | ||||||||||||
Long-term Debt | 41,425 | — | (3,850 | ) | (g) | 37,575 | ||||||||||
Deferred Credits and Other Liabilities: | ||||||||||||||||
Accumulated deferred income taxes | 6,035 | — | — | 6,035 | ||||||||||||
Deferred credits related to income taxes | 6,651 | — | — | 6,651 | ||||||||||||
Accumulated deferred ITCs | 2,377 | — | — | 2,377 | ||||||||||||
Employee benefit obligations | 2,017 | — | — | 2,017 | ||||||||||||
Asset retirement obligations, deferred | 5,817 | — | — | 5,817 | ||||||||||||
Accrued environmental remediation | 269 | — | — | 269 | ||||||||||||
Other cost of removal obligations | 2,330 | — | — | 2,330 | ||||||||||||
Other regulatory liabilities, deferred | 153 | — | — | 153 | ||||||||||||
Liabilities held for sale | 2,835 | (2,835 | ) | — | — | |||||||||||
Other deferred credits and liabilities | 454 | — | — | 454 | ||||||||||||
Total deferred credits and other liabilities | 28,938 | (2,835 | ) | — | 26,103 | |||||||||||
Total Liabilities | 83,328 | (2,462 | ) | (3,850 | ) | 77,016 | ||||||||||
Redeemable Preferred Stock of Subsidiaries | 324 | — | — | 324 | ||||||||||||
Stockholders' Equity: | ||||||||||||||||
Common Stockholders' Equity: | ||||||||||||||||
Common stock | 5,140 | — | — | 5,140 | ||||||||||||
Paid-in capital | 10,905 | — | — | 10,905 | ||||||||||||
Treasury, at cost | (39 | ) | — | — | (39 | ) | ||||||||||
Retained earnings | 9,048 | 2,082 | — | 11,130 | ||||||||||||
Accumulated other comprehensive loss | (177 | ) | — | — | (177 | ) | ||||||||||
Total Common Stockholders' Equity | 24,877 | 2,082 | — | 26,959 | ||||||||||||
Noncontrolling Interests | 3,188 | — | — | 3,188 | ||||||||||||
Total Stockholders' Equity | 28,065 | 2,082 | — | 30,147 | ||||||||||||
Total Liabilities and Stockholders' Equity | $ | 111,717 | $ | (380 | ) | $ | (3,850 | ) | $ | 107,487 |
a. | Gain on dispositions, net–Reflects the elimination of the gain recognized on the sale of PUHI during the third quarter 2018. |
b. | Impairment charges–Reflects the elimination of an asset impairment charge related to the sale of Oleander and Stanton recorded during the second quarter 2018. |
c. | Interest expense, net of amounts capitalized–Reflects the use of an estimated $3.85 billion of sale proceeds to reduce certain outstanding debt obligations of Southern Company having a weighted-average interest rate of 2.74%. |
d. | Income taxes (benefit)–Reflects the elimination of $101 million in income tax expense recognized on the gain on sale of PUHI along with the income tax effect of the remaining pro forma adjustments calculated using an estimated statutory rate of 25.2% for the nine months ended September 30, 2018 and 38.4% for the year ended December 31, 2017. |
e. | Cash and cash equivalents–Reflects the net sales proceeds of $4.416 billion for Gulf Power and $203 million for Oleander and Stanton. |
f. | Other current assets–Reflects consideration receivable of $75 million related to the sale of Gulf Power. |
g. | Cash and cash equivalents and Long-term debt–Reflects the use of an estimated $3.85 billion of sale proceeds from the sale of Gulf Power, Oleander, and Stanton to retire existing debt of Southern Company. |
h. | Accrued taxes–Reflects the estimated tax liability associated with the net gain on the sales of Gulf Power, Oleander, and Stanton. |