<PAGE> 1
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 September 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____TO_____
<TABLE>
<CAPTION>
COMMISSION REGISTRANT, STATE OF INCORPORATION, I.R.S. EMPLOYER
FILE NUMBER ADDRESS AND TELEPHONE NUMBER IDENTIFICATION NO.
- ----------- ---------------------------- ------------------
<S> <C> <C>
1-3526 THE SOUTHERN COMPANY 58-0690070
(A Delaware Corporation)
64 Perimeter Center East
Atlanta, Georgia 30346
(404) 393-0650
1-3164 ALABAMA POWER COMPANY 63-0004250
(An Alabama Corporation)
600 North 18th Street
Birmingham, Alabama 35291
(205) 250-1000
1-6468 GEORGIA POWER COMPANY 58-0257110
(A Georgia Corporation)
333 Piedmont Avenue, N.E.
Atlanta, Georgia 30308
(404) 526-6526
0-2429 GULF POWER COMPANY 59-0276810
(A Maine Corporation)
500 Bayfront Parkway
Pensacola, Florida 32501
(904) 444-6111
0-6849 MISSISSIPPI POWER COMPANY 64-0205820
(A Mississippi Corporation)
2992 West Beach
Gulfport, Mississippi 39501
(601) 864-1211
1-5072 SAVANNAH ELECTRIC AND POWER COMPANY 58-0418070
(A Georgia Corporation)
600 Bay Street, East
Savannah, Georgia 31401
(912) 232-7171
</TABLE>
<PAGE> 2
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____
<TABLE>
<CAPTION>
DESCRIPTION OF SHARES OUTSTANDING
REGISTRANT COMMON STOCK AT OCTOBER 31, 1994
- ---------- ------------- -------------------
<S> <C> <C>
THE SOUTHERN COMPANY PAR VALUE $5 PER SHARE 653,416,983
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
</TABLE>
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.
<PAGE> 3
Table of Contents
<TABLE>
<CAPTION>
PART I
PAGE
<S> <C>
DEFINITIONS 4
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
Management's Opinion as to Fair Statement of Results 6
Condensed Statements of Income 7
Condensed Statements of Cash Flows 8
Condensed Balance Sheets 9
Management's Discussion and Analysis of Results of Operations and Financial Condition 11
ALABAMA POWER COMPANY
Management's Opinion as to Fair Statement of Results 18
Review by Independent Public Accountants 18
Condensed Statements of Income 19
Condensed Statements of Cash Flows 20
Condensed Balance Sheets 21
Management's Discussion and Analysis of Results of Operations and Financial Condition 23
Exhibit 1 - Report of Independent Public Accountants 27
GEORGIA POWER COMPANY
Management's Opinion as to Fair Statement of Results 29
Review by Independent Public Accountants 29
Condensed Statements of Income 30
Condensed Statements of Cash Flows 31
Condensed Balance Sheets 32
Management's Discussion and Analysis of Results of Operations and Financial Condition 34
Exhibit 1 - Report of Independent Public Accountants 40
GULF POWER COMPANY
Management's Opinion as to Fair Statement of Results 42
Condensed Statements of Income 43
Condensed Statements of Cash Flows 44
Condensed Balance Sheets 45
Management's Discussion and Analysis of Results of Operations and Financial Condition 47
MISSISSIPPI POWER COMPANY
Management's Opinion as to Fair Statement of Results 51
Condensed Statements of Income 52
Condensed Statements of Cash Flows 53
Condensed Balance Sheets 54
Management's Discussion and Analysis of Results of Operations and Financial Condition 56
SAVANNAH ELECTRIC AND POWER COMPANY
Management's Opinion as to Fair Statement of Results 61
Condensed Statements of Income 62
Condensed Statements of Cash Flows 63
Condensed Balance Sheets 64
Management's Discussion and Analysis of Results of Operations and Financial Condition 66
NOTES TO THE CONDENSED FINANCIAL STATEMENTS 69
</TABLE>
3
<PAGE> 4
Table of Contents
(Continued)
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART II
Item 1. Legal Proceedings 74
Item 4. Submission of Matters to a Vote of Security Holders 74
Item 6. Exhibits and Reports on Form 8-K 75
SIGNATURES 76
</TABLE>
DEFINITIONS
<TABLE>
<CAPTION>
TERM MEANING
---- -------
<S> <C>
AFUDC . . . . . . . . . . . . . . . . . . . . . Allowance for Funds Used During Construction
ALABAMA . . . . . . . . . . . . . . . . . . . . Alabama Power Company
Clean Air Act . . . . . . . . . . . . . . . . . Clean Air Act Amendments of 1990
ECO Plan . . . . . . . . . . . . . . . . . . . . Environmental Compliance Overview Plan
Energy Act . . . . . . . . . . . . . . . . . . . Energy Policy Act of 1992
FERC . . . . . . . . . . . . . . . . . . . . . . Federal Energy Regulatory Commission
GEORGIA . . . . . . . . . . . . . . . . . . . . Georgia Power Company
GULF . . . . . . . . . . . . . . . . . . . . . . Gulf Power Company
Gulf States . . . . . . . . . . . . . . . . . . Gulf States Utilities Company
IRS . . . . . . . . . . . . . . . . . . . . . . Internal Revenue Service
MEAG . . . . . . . . . . . . . . . . . . . . . . Municipal Electric Authority of Georgia
MISSISSIPPI . . . . . . . . . . . . . . . . . . Mississippi Power Company
NRC . . . . . . . . . . . . . . . . . . . . . . Nuclear Regulatory Commission
OPC . . . . . . . . . . . . . . . . . . . . . . Oglethorpe Power Corporation
PEP . . . . . . . . . . . . . . . . . . . . . . Performance Evaluation Plan
PSC . . . . . . . . . . . . . . . . . . . . . . Public Service Commission
SAVANNAH . . . . . . . . . . . . . . . . . . . Savannah Electric and Power Company
SCS . . . . . . . . . . . . . . . . . . . . . . Southern Company Services, Inc.
SEC . . . . . . . . . . . . . . . . . . . . . . Securities and Exchange Commission
SEGCO . . . . . . . . . . . . . . . . . . . . . Southern Electric Generating Company
SOUTHERN . . . . . . . . . . . . . . . . . . . The Southern Company
</TABLE>
4
<PAGE> 5
THE SOUTHERN COMPANY
AND SUBSIDIARY COMPANIES
5
<PAGE> 6
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S OPINION AS TO FAIR STATEMENT OF RESULTS
The condensed financial statements of SOUTHERN included herein have been
prepared by SOUTHERN, without audit, pursuant to the rules and regulations of
the SEC. In the opinion of SOUTHERN's management, subject to the effect of
such adjustments, if any, as might have been required had the outcome of the
uncertainty with respect to the actions of the regulators regarding the
recoverability of GEORGIA's investment in the Rocky Mountain pumped storage
hydroelectric project, as more fully discussed in Note (G) to the Condensed
Financial Statements herein, been known, the information furnished herein
reflects all adjustments (which, except for the provision for separation
benefits recorded in 1994, included only normal recurring adjustments)
necessary to present fairly the results for the periods ended September 30,
1994 and 1993. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although SOUTHERN believes that the disclosures are adequate to
make the information presented not misleading. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and the notes thereto included in SOUTHERN's latest annual report on
Form 10-K and, with respect to nuclear decommissioning, the March 31, 1994
quarterly report on Form 10-Q.
6
<PAGE> 7
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Stated in Thousands of Dollars)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months For the Twelve Months
Ended September 30, Ended September 30, Ended September 30,
------------------- ------------------- -------------------
1994 1993 1994 1993 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES $2,381,335 $2,636,381 $6,382,250 $6,544,069 $8,327,327 $8,411,656
---------- ---------- ---------- ---------- ---------- ----------
OPERATING EXPENSES:
Operation--
Fuel 591,568 724,876 1,608,240 1,738,842 2,134,401 2,224,477
Purchased power 48,171 86,461 171,779 271,055 236,410 374,021
Provision for separation benefits (573) - 96,245 - 96,245 -
Other 335,275 398,022 1,026,285 1,059,649 1,412,339 1,411,940
Maintenance 162,201 140,242 497,077 462,053 687,587 651,190
Depreciation and amortization 204,664 198,688 607,050 594,295 806,241 788,402
Amortization of deferred Plant Vogtle
expenses, net (Note F) 22,847 11,982 51,254 21,021 66,517 17,856
Taxes other than income taxes 121,309 121,370 358,260 349,037 470,652 451,502
Federal and state income taxes 289,316 317,934 589,201 608,307 714,876 714,680
---------- ---------- ----------- ---------- ---------- ----------
Total operating expenses 1,774,778 1,999,575 5,005,391 5,104,259 6,625,268 6,634,068
---------- ---------- ----------- ---------- ---------- ----------
OPERATING INCOME 606,557 636,806 1,376,859 1,439,810 1,702,059 1,777,588
OTHER INCOME (EXPENSE):
Allowance for equity funds used during construction 2,680 2,804 8,455 4,688 12,749 6,898
Interest income 7,834 12,417 21,375 24,846 26,678 30,292
Other, net (26,571) (27,412) (42,585) (2,243) (81,677) (39,322)
Income taxes applicable to other income 12,339 10,936 17,064 34,037 40,243 65,251
---------- ---------- ---------- ---------- ---------- ----------
INCOME BEFORE INTEREST CHARGES 602,839 635,551 1,381,168 1,501,138 1,700,052 1,840,707
---------- ---------- ---------- ---------- ---------- ----------
INTEREST CHARGES AND PREFERRED DIVIDENDS:
Interest on long-term debt 141,496 146,302 430,154 452,869 572,029 609,782
Allowance for debt funds used during construction (4,061) (3,355) (13,787) (9,435) (17,604) (11,360)
Interest on interim obligations 7,142 8,308 24,714 21,460 33,085 25,685
Amortization of debt discount, premium
and expense, net 7,598 6,985 22,441 19,101 29,636 24,112
Other interest charges 12,682 12,809 38,796 77,798 48,086 86,685
Preferred dividends of subsidiary companies 22,030 22,826 65,096 70,182 88,381 95,407
---------- ---------- ---------- ---------- ---------- ----------
Net interest charges and preferred dividends 186,887 193,875 567,414 631,975 753,613 830,311
---------- ---------- ---------- ---------- ---------- ----------
CONSOLIDATED NET INCOME $ 415,952 $ 441,676 $ 813,754 $ 869,163 $ 946,439 $1,010,396
========== ========== ========== ========== ========== ==========
AVERAGE NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING *(THOUSANDS) 650,454 638,828 648,417 636,167 646,507 635,355
EARNINGS PER SHARE OF COMMON STOCK* $ 0.64 $ 0.70 $ 1.25 $ 1.37 $ 1.46 $ 1.59
CASH DIVIDENDS PAID PER SHARE
OF COMMON STOCK* $ 0.295 $ 0.285 $ 0.885 $ 0.855 $ 1.17 $ 1.13
</TABLE>
*The data for 1993 are adjusted to reflect a two-for-one common stock split in
the form of a stock distribution for each share issued and outstanding as of
February 7, 1994.
( ) Denotes red figure.
The accompanying notes as they relate to SOUTHERN are an integral part of these
condensed statements.
7
<PAGE> 8
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Stated in Thousands of Dollars)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
--------------------------
1994 1993
---------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Consolidated net income $ 813,754 $ 869,163
Adjustments to reconcile consolidated net income to net cash
provided by operating activities--
Depreciation and amortization 786,836 761,792
Deferred income taxes, net 28,076 77,581
Allowance for equity funds used during construction (8,455) (4,688)
Deferred Plant Vogtle costs 51,254 21,021
Provision for separation benefits 78,993 -
Gain on asset sales (23,375) (35,271)
Other, net 34,066 (59,043)
Changes in certain current assets and liabilities--
Receivables, net (24,708) (197,118)
Fossil fuel stock (50,138) 119,162
Materials and supplies (8,167) (12,286)
Accounts payable (47,910) 28,958
Other 82,066 167,525
----------- -----------
Net cash provided from operating activities 1,712,292 1,736,796
----------- -----------
INVESTING ACTIVITIES:
Gross property additions (1,034,060) (974,241)
Sales of property 141,496 253,032
Foreign utility operations - (354,790)
Other (108,508) (51,006)
----------- -----------
Net cash used in investing activities (1,001,072) (1,127,005)
----------- -----------
FINANCING ACTIVITIES:
Proceeds--
Common stock 206,368 144,510
Preferred stock - 156,404
First mortgage bonds 35,000 2,085,000
Pollution control bonds 609,815 352,496
Other long-term debt 377,185 110,075
Retirements--
Preferred stock (1,000) (256,404)
First mortgage bonds (240,238) (2,019,205)
Pollution control bonds (469,910) (317,520)
Other long-term debt (181,359) (71,024)
Special deposits-redemption funds (143,819) (20,000)
Interim obligations, net (366,702) (33,463)
Payment of common stock dividends (573,999) (543,221)
Miscellaneous (23,808) (118,417)
----------- -----------
Net cash provided from (used in) financing activities (772,467) (530,769)
----------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS (61,247) 79,022
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 178,346 97,313
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 117,099 $ 176,335
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for--
Interest (net of amount capitalized) $ 485,613 $ 526,479
Income taxes 515,503 365,040
</TABLE>
The accompanying notes as they relate to SOUTHERN are an integral part of these
condensed statements.
8
<PAGE> 9
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
ASSETS
<TABLE>
<CAPTION>
At September 30,
1994 At December 31,
(Unaudited) 1993
---------------- ---------------
<S> <C> <C>
UTILITY PLANT:
Plant in service (Note C) $28,243,277 $27,686,539
Less accumulated provision for depreciation 9,359,513 8,933,717
----------- -----------
18,883,764 18,752,822
Nuclear fuel, at amortized cost 230,013 229,293
Construction work in progress 1,061,018 1,031,240
----------- -----------
Total 20,174,795 20,013,355
----------- -----------
OTHER PROPERTY AND INVESTMENTS:
Foreign utility operations, being amortized 533,456 558,960
Nuclear decommissioning trusts (Note C) 114,520 87,487
Miscellaneous 131,796 89,425
----------- -----------
Total 779,772 735,872
----------- -----------
CURRENT ASSETS:
Cash and cash equivalents 117,099 178,346
Special deposits - redemption funds 143,819 -
Receivables, less accumulated provisions for uncollectible accounts
of $10,311 at September 30, 1994 and $9,067 at December 31, 1993 1,178,881 1,146,774
Fossil fuel stock, at average cost 294,490 254,026
Materials and supplies, at average cost 542,889 534,722
Prepayments 171,646 147,915
Miscellaneous 71,657 73,074
----------- -----------
Total 2,520,481 2,334,857
----------- -----------
DEFERRED CHARGES:
Deferred charges related to income taxes 1,483,204 1,546,338
Deferred Plant Vogtle costs (Note F) 455,726 506,980
Debt expense and loss, being amortized 328,735 320,515
Deferred fuel charges 52,411 70,404
Miscellaneous 474,617 382,336
----------- -----------
Total 2,794,693 2,826,573
----------- -----------
TOTAL ASSETS $26,269,741 $25,910,657
=========== ===========
</TABLE>
The accompanying notes as they relate to SOUTHERN are an integral part of these
condensed statements.
9
<PAGE> 10
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
At September 30,
1994 At December 31,
(Unaudited) 1993
---------------- ---------------
<S> <C> <C>
CAPITALIZATION:
Common stock, par value $5 per share -
Authorized - 1 billion shares;
Outstanding - September 30, 1994: 652,919,369 shares
December 31, 1993: 642,661,658 shares* $ 3,264,599 $ 3,213,308
Paid-in capital 1,656,764 1,502,193
Premium on preferred stock 1,012 1,012
Retained earnings 3,207,850 2,967,706
----------- -----------
8,130,225 7,684,219
Preferred stock 1,332,203 1,332,203
Preferred stock subject to mandatory redemption - 1,000
Long-term debt 7,145,776 7,411,455
----------- -----------
Total 16,608,204 16,428,877
----------- -----------
CURRENT LIABILITIES:
Preferred stock due within one year 1,000 1,000
Long-term debt due within one year 550,410 155,638
Notes payable 335,070 865,381
Commercial paper 239,136 75,527
Accounts payable 628,480 697,749
Customer deposits 103,333 102,822
Taxes accrued--
Federal and state income 52,774 34,023
Other 250,221 171,673
Interest accrued 175,530 186,057
Vacation pay accrued 91,113 90,206
Miscellaneous 226,370 190,638
----------- -----------
Total 2,653,437 2,570,714
----------- -----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes 4,026,267 3,978,889
Deferred credits related to income taxes 1,009,321 1,050,512
Accumulated deferred investment tax credits 870,257 900,203
Disallowed Plant Vogtle capacity buyback costs 55,610 63,067
Prepaid capacity revenues, net 139,805 143,762
Miscellaneous 906,840 774,633
----------- -----------
Total 7,008,100 6,911,066
----------- -----------
TOTAL CAPITALIZATION AND LIABILITIES $26,269,741 $25,910,657
=========== ===========
</TABLE>
*Adjusted to reflect a two-for-one common stock split in the form of a stock
distribution for each share issued and outstanding as of February 7, 1994.
The accompanying notes as they relate to SOUTHERN are an integral part of these
condensed statements.
10
<PAGE> 11
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
EARNINGS
SOUTHERN's earnings for the third quarter of 1994 fell below the earnings
recorded in the same period of 1993 primarily because of lower revenues.
Consolidated net income was $416 million for the third quarter of 1994,
compared to $442 million for the third quarter of 1993. Earnings per share
were $0.64 and $0.70 in the third quarter of 1994 and 1993, respectively.
REVENUES
Revenues decreased due to lower fuel clause revenues, reduced sales to
off-system utilities and weather influences. The summer of 1993 was
exceptionally hot in contrast to the milder than normal temperatures
experienced this past summer. As discussed further in Note (N) to the
Condensed Financial Statements herein, ALABAMA recorded an additional $28
million in unbilled revenues as a result of adopting a new procedure for
estimating such sales. Excluding ALABAMA's recognition of additional unbilled
energy sales, retail energy sales for the third quarter of 1994 decreased 4.4%,
compared to the third quarter of 1993, however, because of continued economic
development in the Southeast, sales to industrial customers increased 2.3%.
Wholesale energy sales decreased 22.9% due to reduced demand and contractually
scheduled reductions in off-system contracts. As a result, total energy sales
decreased 7.5%, excluding ALABAMA's additional unbilled energy sales. Capacity
revenues for the third quarter of 1994 were $17 million less than in the third
quarter of 1993. The capacity revenues decreased as scheduled, a significant
portion of which coincides with GEORGIA completing the third sale of a portion
of Plant Scherer Unit 4 in June 1994. The final sale in a series of four
transactions for the sale of this generating unit is scheduled for June 1995.
The generation from this unit has been dedicated to unit power sales.
EXPENSES
Fuel expense for the third quarter of 1994, compared to the corresponding
period of 1993, was significantly lower due primarily to a decrease in the
average cost of coal and less generation which reflects lower demand.
Purchased power expense decreased because of the reduction in capacity buyback
payments by GEORGIA to the co-owners of plants Vogtle and Scherer and lower
demand from wholesale customers. See Note (F) to the Condensed Financial
Statements herein for information regarding the Georgia PSC's retail rate order
that required the levelization of capacity buyback expense for Plant Vogtle.
Other operation expenses dropped sharply in the third quarter of 1994,
compared to the corresponding period of 1993. However, the expenses for 1993
included such costs as $20 million for an automotive fleet reduction program,
$12 million for environmental remediation, $4 million for SAVANNAH's work force
reduction program, the recognition of higher employee benefit costs and higher
reserves for uncollectible accounts. Other operation expenses in the third
quarter of 1994 reflect lower pension costs as indicated by updated actuarial
estimates. The increase in maintenance expenses is attributable to ALABAMA
accruing $28 million for the establishment of a Natural
11
<PAGE> 12
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS (Continued)
Disaster Reserve. This new reserve is offset by ALABAMA's recognition of
additional unbilled energy and revenues, as discussed above.
The Southern electric system has instituted a number of initiatives to curb
the growth of expenses, including workforce reduction programs. The one-time
cost of these programs (approximately $96 million expensed and $15 million
deferred) is expected to be recovered within three years through operation and
maintenance and capital cost savings. See Note (M) to the Condensed Financial
Statements herein for further information on these programs.
The decrease in income tax expense was due to lower earnings and because
the SOUTHERN system recorded additional income tax expense in the third quarter
of 1993 due to the enactment of the retroactive federal income tax rate
increase in August 1993.
INTEREST CHARGES AND DIVIDENDS ON PREFERRED STOCK
The decrease in interest on long-term debt and dividends on preferred stock
reflects the SOUTHERN system's efforts to decrease its capital costs. In
response to the low interest rate levels prevailing during 1992 and 1993, the
SOUTHERN system refinanced a significant portion of its long-term debt and
preferred stock. To the extent it is economically feasible, efforts to reduce
capital costs will continue.
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION
AFUDC represents the cost of capital charged to utility plant under
construction and not included in rate base. The equity portion represents
non-cash income. However, when facilities are completed and included in rate
base, previously capitalized amounts significantly increase cash flow because
revenues are higher as a result of the increased rate base and additional
depreciation expense.
FUTURE EARNINGS POTENTIAL
The results of operations discussed above are not necessarily indicative of
future earnings potential. The level of future earnings is contingent upon
numerous factors ranging from regulatory matters to growth in energy sales.
Reference is made to the Notes to the Condensed Financial Statements herein
for further discussion of various uncertainties and legal proceedings related
to: the actions of regulators regarding the recovery of GEORGIA's investment
in the Rocky Mountain pumped storage hydroelectric project; a civil suit filed
against ALABAMA related to financing agreements; the outcome of proceedings
initiated by the FERC to determine the appropriate return on equity on
wholesale power and transmission contracts; and complaints filed by MEAG and
OPC seeking to recover from GEORGIA an aggregate of $22.8 million (including
interest) in alleged partial requirements rates overcharges.
12
<PAGE> 13
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS (Continued)
Pursuant to an Integrated Resource Plan approved by the Georgia PSC,
GEORGIA has implemented various demand-side option programs and had been
authorized by the Georgia PSC to recover associated program costs through rate
riders. A superior court judge's ruling that recovery of these costs through
rate riders was unlawful was reversed by the Georgia Court of Appeals in July
1994. GEORGIA has ceased collection of the rate riders and the Georgia PSC has
allowed the deferral of program costs pending the final outcome of this matter.
For additional information on this matter, see Note (H) to the Condensed
Financial Statements herein.
During the third quarter of 1994, OPC gave GEORGIA notice, as contractually
required, of its intent to decrease its purchases of capacity under a power
supply agreement. As a result, GEORGIA's capacity revenues from OPC will
decline approximately $7.5 million in 1996 and an additional $15.5 million in
1997.
The IRS has notified SOUTHERN that its tax accounting for the sale by
GEORGIA of a portion of Plant Vogtle in 1984 was improper. The potential tax
deficiency and interest arising from this issue amount to approximately $30
million and $33 million, respectively. The tax deficiency relates to a timing
issue as to when taxes are paid, therefore only the interest could impact
future income. In September 1994, GEORGIA deposited $46 million with the IRS
to prevent additional interest charges should GEORGIA's position on this issue
not prevail. See Note (I) to the Condensed Financial Statements herein for
further discussion of this matter.
Compliance costs related to the Clean Air Act will reduce earnings if such
increased costs cannot be offset. The Clean Air Act is discussed under
"Environmental Matters" in Item 7 - Management's Discussion and Analysis in
SOUTHERN's 1993 Annual Report on Form 10-K. Also see Note (K) to the Condensed
Financial Statements herein for information regarding a list of sites,
including a number of sites owned by GEORGIA, compiled by the State of Georgia
that may require environmental remediation.
Future earnings in the near term will also depend upon growth in electric
sales which are subject to a number of factors. Traditionally, these factors
have included changes in contracts with neighboring utilities, energy
conservation practiced by customers, the elasticity of demand, weather,
competition, and the rate of economic growth in SOUTHERN's service area. The
enactment of the Energy Act will have a profound effect on the electric utility
industry. A discussion of the potential impact of the Energy Act and
particularly its effect on competition is found under "Future Earnings
Potential" in Item 7 - Management's Discussion and Analysis in SOUTHERN's 1993
Annual Report on Form 10-K.
The staff of the SEC has questioned certain of the current accounting
practices of the electric utility industry regarding the recognition,
measurement and classification of decommissioning costs for nuclear generating
stations in financial statements. In response to these questions, the
Financial
13
<PAGE> 14
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS (Continued)
Accounting Standards Board has decided to review the accounting for nuclear
decommissioning. If current electric utility industry accounting practices for
such decommissioning costs are changed: (1) annual provisions for
decommissioning could increase and (2) the total estimated cost for
decommissioning may be required to be recorded as a liability on the balance
sheet. ALABAMA and GEORGIA do not believe that such changes, if required,
would have a significant adverse effect on results of operations due to their
current and expected future ability to recover decommissioning costs through
rates. Further discussion of nuclear decommissioning costs is made in Note (C)
to the Condensed Financial Statements herein.
FINANCIAL CONDITION
OVERVIEW
The major changes in SOUTHERN's financial condition during the first nine
months of 1994 were the addition of approximately $1.0 billion to utility
plant, the commercial operation of seven combustion turbine generating units
having an aggregate nameplate capacity of approximately 555 megawatts, the sale
of a portion of Plant Scherer Unit 4, recognition of the liability associated
with the implementation of workforce reduction programs and the sale of
SOUTHERN's common stock for $206 million. The funds for gross property
additions and other capital requirements were derived primarily from
operations, the sale of a portion of Plant Scherer and other security sales.
See SOUTHERN's Condensed Statements of Cash Flows for further details.
Additionally, SOUTHERN's board of directors declared a two-for-one common stock
split in the form of a stock distribution for each share issued and outstanding
as of February 7, 1994.
CAPITAL STRUCTURE
One of SOUTHERN's goals is to maintain common equity as a percent of total
capitalization, including short-term debt and the current portion of
capitalization, within a range of 40 to 45%. This ratio was 45.8% at September
30, 1994, compared to 43.8% at December 31, 1993. The market price of
SOUTHERN's common stock at September 30, 1994, was $18.625 per share, compared
to a book value of $12.45. This represents a market-to-book value ratio of
150%. The quarterly dividend for the third quarter of 1994 was 29.5 cents per
share.
CAPITAL REQUIREMENTS FOR CONSTRUCTION
The construction program of the Southern electric system is budgeted at $4.3
billion for the three years 1994 through 1996 ($1.5 billion in 1994, $1.3
billion in 1995 and $1.5 billion in 1996). Actual construction costs may vary
from this estimate because of such factors as changes in business conditions;
changes in nuclear plants to meet new regulations; changes in environmental
regulations; revised load growth projections; increasing costs of labor,
equipment and materials; and the cost of capital.
14
<PAGE> 15
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
FINANCIAL CONDITION (Continued)
Current energy demand forecasts do not require any additional baseload
generating facilities until well into the future. However, the construction of
combustion turbine peaking units of approximately 1,700 megawatts is planned by
1996, including those that began commercial operation in 1994, to meet the
increased peak-hour demands. In addition, significant construction will
continue related to transmission and distribution facilities and the upgrading
and extension of the useful lives of generating plants. GEORGIA and OPC have
entered into a joint ownership agreement for the latter to assume
responsibility for the construction and completion of the Rocky Mountain
project. This agreement is described further in Note 4 to the financial
statements in Item 8 of SOUTHERN's 1993 Annual Report on Form 10-K.
Changes in environmental regulations could substantially increase the
Southern electric system's capital requirements and operating costs. The acid
rain compliance provision of the Clean Air Act will have a significant impact
on the Southern electric system. This legislation, as well as other
legislation and regulations, are described under "Environmental Matters" in
Item 7 - Management's Discussion and Analysis in SOUTHERN's 1993 Annual Report
on Form 10-K. The full impact of these requirements cannot be determined at
this time, pending the development and implementation of applicable
regulations.
OTHER CAPITAL REQUIREMENTS
In addition to the funds needed for the construction program, approximately
$408 million, excluding those funds on deposit with trustees and which are
specifically designated for called redemptions, will be required by September
30, 1995, for present sinking fund requirements, redemptions and maturities of
long-term debt and preferred stock. Also, the operating subsidiaries plan to
continue, to the extent possible, a program to retire high-cost debt and
preferred stock and replace these obligations with lower-cost capital.
SOURCES OF FUNDS
In addition to the sale of common stock in the first nine months of 1994,
SOUTHERN may require additional equity capital during the remainder of the
year. The amounts and timing of additional equity capital to be raised in
1994, as well as in subsequent years, will be contingent on SOUTHERN's
investment opportunities. The operating subsidiaries plan to obtain the funds
required for construction and other purposes from sources similar to those used
in the past. However, the type and timing of financings will depend on market
conditions, maintenance of adequate earnings, and regulatory approval.
Additionally, GEORGIA expects to receive approximately $130 million in 1995
from the sale of its remaining ownership interest in Plant Scherer Unit 4.
These property sales are discussed further in Note 7 to the financial
statements in Item 8 in SOUTHERN's 1993 Annual Report on Form 10-K.
15
<PAGE> 16
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
FINANCIAL CONDITION (Continued)
To meet short-term cash needs and contingencies, the SOUTHERN system had at
September 30, 1994 approximately $117 million of cash and cash equivalents and
approximately $1.3 billion of unused credit arrangements with banks.
At September 30, 1994, the system companies had outstanding $335 million of
notes payable and $239 million of commercial paper. The short-term lines of
credit may not be utilized in their entirety without additional regulatory
approval. Since the construction program with respect to major generating
projects has been completed, management believes that the need for working
capital can be adequately met by utilizing lines of credit without maintaining
large cash balances.
In order to issue additional long-term debt and preferred stock, the
operating subsidiaries must comply with certain earnings coverage requirements
outlined in their respective mortgage indentures and corporate charters. The
coverage ratios of SOUTHERN's operating subsidiaries are sufficiently high to
permit, at present interest rate levels, any foreseeable security sales. The
amount of securities which they will be permitted to issue in the future will
depend upon market conditions and other factors prevailing at that time.
16
<PAGE> 17
ALABAMA POWER COMPANY
17
<PAGE> 18
ALABAMA POWER COMPANY
MANAGEMENT'S OPINION AS TO FAIR STATEMENT OF RESULTS
The condensed financial statements of ALABAMA included herein have been
prepared by ALABAMA, without audit, pursuant to the rules and regulations of
the SEC. In the opinion of ALABAMA's management, the information regarding
ALABAMA furnished herein reflects all adjustments (which, except for the
adjustment to revenues and the establishment of a Natural Disaster Reserve in
September 1994, included only normal recurring adjustments) necessary to
present fairly the results for the periods ended September 30, 1994 and 1993.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
ALABAMA believes that the disclosures regarding ALABAMA are adequate to make
the information presented not misleading. It is suggested that these condensed
financial statements be read in conjunction with the financial statements and
the notes thereto included in ALABAMA's latest annual report on Form 10-K and,
with respect to nuclear decommissioning, the March 31, 1994 quarterly report on
Form 10-Q.
REVIEW BY INDEPENDENT PUBLIC ACCOUNTANTS
The condensed financial statements of ALABAMA included herein have been
reviewed by ALABAMA's independent public accountants as set forth in their
report included herein as Exhibit 1.
18
<PAGE> 19
ALABAMA POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Stated in Thousands of Dollars)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months For the Twelve Months
Ended September 30, Ended September 30, Ended September 30,
-------------------- ------------------- ---------------------
1994 1993 1994 1993 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Revenues $803,220 $871,658 $2,168,707 $2,148,694 $2,845,647 $2,770,462
Revenues from affiliates 35,707 48,276 116,466 140,388 158,053 173,776
-------- -------- ---------- ---------- ---------- ----------
Total operating revenues 838,927 919,934 2,285,173 2,289,082 3,003,700 2,944,238
-------- -------- ---------- ---------- ---------- ----------
OPERATING EXPENSES:
Operation--
Fuel 217,901 286,727 622,770 656,650 843,219 833,081
Purchased power from non-affiliates 2,265 5,892 11,900 13,006 14,123 16,704
Purchased power from affiliates 26,900 35,698 78,595 90,893 108,032 119,044
Other 109,231 124,157 333,401 344,894 459,322 467,604
Maintenance 78,716 51,730 198,420 167,749 283,177 245,557
Depreciation and amortization 72,878 72,558 218,237 217,297 291,251 286,925
Taxes other than income taxes 45,833 44,296 137,277 134,707 181,567 177,064
Federal and state income taxes 85,467 93,725 193,518 175,356 225,373 203,931
-------- -------- ---------- ---------- ---------- ----------
Total operating expenses 639,191 714,783 1,794,118 1,800,552 2,406,064 2,349,910
-------- -------- ---------- ---------- ---------- ----------
OPERATING INCOME 199,736 205,151 491,055 488,530 597,636 594,328
OTHER INCOME (EXPENSE):
Allowance for equity funds used during construction 579 1,296 1,749 2,435 2,574 2,947
Interest income 4,242 8,796 12,500 16,600 16,674 17,318
Other, net (6,258) (4,119) (25,741) (8,285) (40,748) (21,281)
Income taxes applicable to other income 2,941 10 9,876 1,739 18,376 12,785
-------- -------- ---------- ---------- ---------- ----------
INCOME BEFORE INTEREST CHARGES 201,240 211,134 489,439 501,019 594,512 606,097
-------- -------- ---------- ---------- ---------- ----------
INTEREST CHARGES:
Interest on long-term debt 44,544 45,291 133,681 140,723 177,819 186,629
Allowance for debt funds used during construction (716) (657) (2,165) (2,235) (2,923) (2,240)
Interest on interim obligations 1,868 1,143 4,177 3,512 4,424 4,698
Amortization of debt discount, premium, and expense, net 2,505 2,378 7,400 6,498 9,839 8,126
Other interest charges 5,200 5,059 14,945 30,396 20,024 35,311
-------- -------- ---------- ---------- ---------- ----------
Net interest charges 53,401 53,214 158,038 178,894 209,183 232,524
-------- -------- ---------- ---------- ---------- ----------
NET INCOME 147,839 157,920 331,401 322,125 385,329 373,573
DIVIDENDS ON PREFERRED STOCK 6,625 7,102 19,488 22,003 27,044 30,229
-------- -------- ---------- ---------- ---------- ----------
NET INCOME AFTER DIVIDENDS ON
PREFERRED STOCK $141,214 $150,818 $ 311,913 $ 300,122 $ 358,285 $ 343,344
======== ======== ========== ========== ========== ==========
</TABLE>
The accompanying notes as they relate to ALABAMA are an integral part of these
condensed statements.
19
<PAGE> 20
ALABAMA POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Stated in Thousands of Dollars)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
-------------------
1994 1993
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 331,401 $ 322,125
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 268,500 270,935
Deferred income taxes, net 2,377 435
Allowance for equity funds used during construction (1,749) (2,435)
Other, net 42,708 45,770
Change in certain current assets and liabilities:
Receivables, net (18,679) (9,968)
Inventories (7,449) 24,799
Payables (116,613) (34,972)
Taxes accrued 50,471 62,270
Energy cost recovery, retail (2,478) (24,842)
Other (22,105) (30,505)
--------- ---------
Net cash provided from operating activities 526,384 623,612
--------- ---------
INVESTING ACTIVITIES:
Gross property additions (334,366) (312,309)
Other (23,359) 3,694
--------- ---------
Net cash used for investing activities (357,725) (308,615)
--------- ---------
FINANCING ACTIVITIES:
Proceeds:
Preferred stock - 38,000
First mortgage bonds - 760,000
Other long-term debt 208,910 174,110
Retirements:
Preferred stock - (87,000)
First mortgage bonds (20,387) (666,504)
Other long-term debt (108,653) (173,002)
Special deposits - redemption funds (101,650) -
Interim obligations, net 81,516 (108,955)
Payment of preferred stock dividends (18,723) (23,883)
Payment of common stock dividends (200,400) (189,400)
Miscellaneous (4,415) (46,765)
--------- ---------
Net cash provided from (used for) financing activities (163,802) (323,399)
--------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS 4,857 (8,402)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,233 13,629
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8,090 $ 5,227
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for--
Interest (net of amount capitalized) $ 140,343 $ 134,129
Income taxes 157,331 134,722
</TABLE>
The accompanying notes as they relate to ALABAMA are an integral part of these
condensed statements.
20
<PAGE> 21
ALABAMA POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
ASSETS
<TABLE>
<CAPTION>
At September 30,
1994 At December 31,
(Unaudited) 1993
---------------- ---------------
<S> <C> <C>
UTILITY PLANT:
Plant in service, at original cost (Note C) $9,949,238 $9,757,141
Less accumulated provision for depreciation 3,559,940 3,384,156
---------- ----------
6,389,298 6,372,985
Nuclear fuel, at amortized cost 87,471 93,551
Construction work in progress 282,859 225,786
---------- ----------
Total 6,759,628 6,692,322
---------- ----------
OTHER PROPERTY AND INVESTMENTS 106,118 99,185
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents 8,090 3,233
Special deposit - redemption funds 101,650 -
Receivables --
Customer accounts receivable 363,541 312,090
Other accounts and notes receivable 35,843 48,808
Affiliated companies 34,716 40,216
Accumulated provision for uncollectible accounts (2,521) (2,632)
Refundable income taxes - 11,940
Fossil fuel stock, at average cost 93,979 88,481
Materials and supplies, at average cost 178,679 176,728
Prepayments--
Income taxes 9,363 18,980
Other 90,223 60,227
Vacation pay deferred 22,680 22,680
---------- ----------
Total 936,243 780,751
---------- ----------
DEFERRED CHARGES:
Deferred charges related to income taxes 459,807 469,010
Debt expense and loss, being amortized 106,819 109,698
Uranium enrichment decontamination and decommissioning fund 45,149 45,554
Miscellaneous 53,058 52,163
---------- ----------
Total 664,833 676,425
---------- ----------
TOTAL ASSETS $8,466,822 $8,248,683
========== ==========
</TABLE>
The accompanying notes as they relate to ALABAMA are an integral part of these
condensed statements.
21
<PAGE> 22
ALABAMA POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
At September 30,
1994 At December 31,
(Unaudited) 1993
---------------- ---------------
<S> <C> <C>
CAPITALIZATION:
Common stock equity --
Common stock, par value $40 per share--authorized 6,000,000
shares, outstanding 5,608,955 shares $ 224,358 $ 224,358
Paid-in capital 1,304,645 1,304,645
Premium on preferred stock 146 146
Retained earnings 1,108,522 997,199
---------- -----------
2,637,671 2,526,348
Preferred stock 440,400 440,400
Long-term debt 2,304,611 2,362,852
---------- -----------
Total 5,382,682 5,329,600
---------- -----------
CURRENT LIABILITIES:
Long-term debt due within one year 197,484 58,998
Notes payable 25,000 40,000
Commercial paper 96,516 -
Accounts payable--
Affiliated companies 47,380 62,507
Other 165,084 272,491
Customer deposits 32,416 31,198
Taxes accrued --
Federal and state income 29,121 25,730
Other 59,682 14,414
Interest accrued 50,324 52,809
Miscellaneous 76,310 73,106
---------- -----------
Total 779,317 631,253
---------- -----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes 1,174,859 1,165,127
Accumulated deferred investment tax credits 320,115 329,909
Prepaid capacity revenues, net 139,805 143,762
Uranium enrichment decontamination and decommissioning fund 41,676 39,644
Deferred credits related to income taxes 423,374 441,240
Miscellaneous 204,994 168,148
---------- -----------
Total 2,304,823 2,287,830
---------- -----------
TOTAL CAPITALIZATION AND LIABILITIES $8,466,822 $ 8,248,683
========== ===========
</TABLE>
The accompanying notes as they relate to ALABAMA are an integral part of these
condensed statements.
22
<PAGE> 23
ALABAMA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
ALABAMA's financial performance during the third quarter of 1994 declined,
compared to the same period of 1993, due primarily to lower revenues. Net
income after dividends on preferred stock was $141.2 million during the third
quarter of 1994, compared to $150.8 million in the corresponding period of
1993.
REVENUES
Operating revenues in the third quarter of 1994 decreased from the
corresponding period of 1993 due to lower fuel clause revenues, a decrease in
wholesale energy sales and mild weather during this more recent period. Also,
capacity revenues from non-affiliated wholesale customers decreased $8.4
million. As discussed further in Note (N) to the Condensed Financial
Statements herein, ALABAMA in September 1994 recorded an additional $28 million
in estimated unbilled revenues due to a new procedure to compute such sales.
Revenues from sales to affiliated companies within the Southern electric
system, as well as purchases of energy, will vary from period to period
depending on demand and the availability and cost of generating resources at
each company. These transactions do not have a significant impact on earnings.
EXPENSES
Fuel expense decreased because of a 12.3% decrease in coal-fired generation and
a lower average cost of fuel consumed. Coal-fired generation decreased because
it was displaced with lower cost nuclear and hydro generation and because of
lower demand. Other operation expenses for the third quarter of 1994 reflect a
reduction in ALABAMA's portion of the costs of the system service company's
work force reduction program and, in response to updated actuarial estimates,
lower accruals for pension costs. Other operation expenses in the third
quarter of 1993 included the costs of an automotive fleet reduction program,
raising the reserve for uncollectible accounts and recording its portion of
environmental remediation costs for a SOUTHERN system research facility which
together totaled $11.5 million. The increase in maintenance expense reflects
the establishment of a Natural Disaster Reserve as discussed further in Note
(N) to the Condensed Financial Statements herein.
Taxes other than income taxes increased because of the addition of new
facilities. The decrease in income tax expense reflected the change in
earnings and the recognition of additional income taxes in the third quarter of
1993 to reflect the retroactive federal income tax rate increase enacted in
August 1993.
23
<PAGE> 24
ALABAMA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS (Continued)
OTHER INCOME AND ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION
The change in "Other, net" is primarily attributable to increases in
contributions to non-profit organizations. AFUDC represents the estimated debt
and equity costs of capital funds that are necessary to finance the
construction of new facilities. While cash is not realized currently from such
allowance, it is realized over the service life of the plant through increased
revenues resulting from a higher rate base and higher depreciation expense.
INTEREST CHARGES AND DIVIDENDS ON PREFERRED STOCK
The decreases in interest on long-term debt and dividends on preferred stock
reflect ALABAMA's efforts to decrease its capital costs. ALABAMA, in response
to the low interest rate levels prevailing during 1992 and 1993, refinanced a
significant portion of its long-term debt and preferred stock.
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 regulatory matters to growth in energy sales.
Discussed in the Notes to the Condensed Financial Statements herein are
certain regulatory and legal proceedings that may impact ALABAMA's future
earnings. The issues include a civil suit related to financing agreements and
proceedings concerning the reasonableness of the Southern electric system's
wholesale rate schedules and contracts. Also discussed therein is the
establishment of a Natural Disaster Reserve, a new procedure for estimating
unbilled sales and a retail rate increase moratorium.
Compliance costs related to the Clean Air Act will reduce earnings if such
cost increases cannot be offset. The Clean Air Act and other environmental
issues are discussed under "Environmental Issues" in Item 7 - Management's
Discussion and Analysis in ALABAMA's 1993 Annual Report on Form 10-K.
Future earnings will also depend upon growth in electric sales which are
subject to a number of factors. Traditionally, these factors have included
changes in contracts with neighboring utilities, energy conservation practiced
by customers, the elasticity of demand, weather, competition, and the rate of
economic growth in ALABAMA's service area. The enactment of the Energy Act
will have a profound effect on the future of the electric utility industry. A
discussion of the potential impact of the Energy Act and particularly its
effect on competition is found under "Future Earnings Potential" in Item 7 -
Management's Discussion and Analysis in ALABAMA's 1993 Annual Report on Form
10-K.
The staff of the SEC has questioned certain of the current accounting
practices of the electric utility industry regarding the recognition,
measurement and classification of decommissioning costs
24
<PAGE> 25
ALABAMA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS (Continued)
for nuclear generating stations in financial statements. In response to these
questions, the Financial Accounting Standards Board has decided to review the
accounting for nuclear decommissioning. If current electric utility industry
accounting practices for such decommissioning costs are changed: (1) annual
provisions for decommissioning could increase and (2) the total estimated cost
for decommissioning may be required to be recorded as a liability on the
balance sheet. ALABAMA does not believe that such changes, if required, would
have a significant adverse effect on results of operations due to its current
and expected future ability to recover decommissioning costs through rates.
Further discussion of nuclear decommissioning costs is made in Note (C) to the
Condensed Financial Statements herein.
FINANCIAL CONDITION
OVERVIEW
The principal changes in ALABAMA's financial condition in the first nine months
of 1994 were gross property additions of $334 million to utility plant and the
establishment of the Natural Disaster Reserve. The funds for gross property
additions were derived from operating activities and an increase in short-term
debt. See ALABAMA's Condensed Statements of Cash Flows herein for further
details.
During the first nine months of 1994, ALABAMA refinanced $180 million of
pollution control bonds. ALABAMA's common equity as a percent of total
capitalization was 49.0% at September 30, 1994, compared to 47.4% at year-end
1993.
LIQUIDITY AND CAPITAL RESOURCES
ALABAMA has committed lines of credit and regulatory approval for short-term
borrowings of up to $530 million. At September 30, 1994, ALABAMA had
outstanding $97 million of commercial paper and $25 million of notes payable.
Capital expenditures are estimated to total $1.7 billion for the three years
1994 through 1996 ($588 million in 1994, $572 million in 1995 and $531 million
in 1996). Current energy demand forecasts do not require any additional
baseload generating facilities until well into the future. However, the
construction of combustion turbine peaking units of approximately 720 megawatts
of capacity is planned by 1996 to meet increased peak-hour demands. In
addition, significant construction of transmission and distribution facilities
and upgrading of generating plants will continue.
The capital budget is subject to periodic review and revision and capital
costs incurred may vary from estimates because of several factors, including
changes in business conditions; revised load growth projections; changes in
environmental regulations; changes in existing nuclear plant to meet new
regulatory requirements; increasing costs of labor, equipment and materials;
and the cost of capital.
25
<PAGE> 26
ALABAMA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FINANCIAL CONDITION (Continued)
In addition to the funds needed for the capital budget, approximately $197.5
million will be required by September 30, 1995, for debt maturities. This
amount includes $101.65 million for pollution control bonds that have been
refinanced. The funds for these redemptions are on deposit with the Trustee
and are specifically designated for only that purpose.
It is anticipated that the funds required will be derived from sources
similar to those used in the past. In order to issue additional first mortgage
bonds and preferred stock, ALABAMA must comply with certain earnings coverage
requirements contained in its mortgage indenture and corporate charter.
ALABAMA's coverages are at a level that would permit necessary amounts of
security sales at current interest and dividend rates.
26
<PAGE> 27
ARTHUR ANDERSEN LLP
Exhibit 1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO ALABAMA POWER COMPANY:
We have reviewed the accompanying condensed balance sheet of ALABAMA POWER
COMPANY as of September 30, 1994, and the related condensed statements of
income for the three-month, nine-month and twelve-month periods ended September
30, 1994 and 1993, and condensed statements of cash flows for the nine-month
periods ended September 30, 1994 and 1993. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of ALABAMA POWER COMPANY as of December 31, 1993
(not presented herein) and, in our report dated February 16, 1994, 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, 1993 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
November 9, 1994
27
<PAGE> 28
GEORGIA POWER COMPANY
28
<PAGE> 29
GEORGIA POWER COMPANY
MANAGEMENT'S OPINION AS TO FAIR STATEMENT OF RESULTS
The condensed financial statements of GEORGIA included herein have
been prepared by GEORGIA, without audit, pursuant to the rules and regulations
of the SEC. As more fully discussed in Note (G) to the Condensed Financial
Statements herein, an uncertainty exists with respect to the actions of the
regulators regarding the recoverability of GEORGIA's investment in the Rocky
Mountain pumped storage hydroelectric project. In the opinion of GEORGIA's
management, subject to the effect of such adjustments, if any, as might have
been required had the outcome of the uncertainty been known, the information
regarding GEORGIA furnished herein reflects all adjustments (which, except for
the provision for separation benefits recorded in 1994, included only normal
recurring adjustments) necessary to present fairly the results for the periods
ended September 30, 1994 and 1993. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to SEC rules and regulations, although GEORGIA believes that the
disclosures regarding GEORGIA are adequate to make the information presented
not misleading. It is suggested that these condensed financial statements be
read in conjunction with the financial statements and the notes thereto
included in GEORGIA's latest annual report on Form 10-K and, with respect to
nuclear decommissioning, the March 31, 1994 quarterly report on Form 10-Q.
REVIEW BY INDEPENDENT PUBLIC ACCOUNTANTS
The condensed financial statements of GEORGIA included herein have been
reviewed by GEORGIA's independent public accountants as set forth in their
report included herein as Exhibit 1.
29
<PAGE> 30
GEORGIA POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Stated in Thousands of Dollars)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months For the Twelve Months
Ended September 30, Ended September 30, Ended September 30,
-------------------- ------------------- -------------------
1994 1993 1994 1993 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Revenues $1,197,061 $1,363,713 $3,182,709 $3,431,251 $4,140,971 $4,405,033
Revenues from affiliates 15,576 11,949 52,725 44,398 69,995 62,966
---------- ---------- ---------- ---------- ---------- ----------
Total operating revenues 1,212,637 1,375,662 3,235,434 3,475,649 4,210,966 4,467,999
---------- ---------- ---------- ---------- ---------- ----------
OPERATING EXPENSES:
Operation--
Fuel 254,677 286,895 683,931 738,162 897,276 954,306
Purchased power from non-affiliates 44,165 76,509 148,296 252,629 208,838 351,179
Purchased power from affiliates 39,102 57,020 115,620 155,558 154,085 194,219
Provision for separation benefits 2,204 - 90,101 - 90,101 5,026
Other 148,796 188,655 470,465 504,370 641,379 664,008
Maintenance 58,059 62,895 203,476 202,929 285,068 282,042
Depreciation and amortization 94,702 93,401 284,146 285,815 377,757 381,779
Amortization of deferred Plant Vogtle expenses,
net (Note F) 22,847 11,982 51,254 21,021 66,517 17,856
Taxes other than income taxes 49,367 52,682 147,816 147,557 192,930 186,986
Federal and state income taxes 167,652 189,865 325,586 371,473 406,234 437,268
---------- ---------- ---------- ---------- ---------- ----------
Total operating expenses 881,571 1,019,904 2,520,691 2,679,514 3,320,185 3,474,669
---------- ---------- ---------- ---------- ---------- ----------
OPERATING INCOME 331,066 355,758 714,743 796,135 890,781 993,330
OTHER INCOME (EXPENSE):
Allowance for equity funds used during
construction 1,538 826 4,450 1,006 6,611 2,546
Interest income 1,326 1,587 2,515 4,555 1,765 8,386
Other, net (6,290) (16,220) 16,950 24,423 8,558 7,803
Income taxes applicable to other income 6,115 10,390 (1,461) 29,603 6,597 46,569
---------- ---------- ---------- ---------- ---------- ----------
INCOME BEFORE INTEREST CHARGES 333,755 352,341 737,197 855,722 914,312 1,058,634
---------- ---------- ---------- ---------- ---------- ----------
INTEREST CHARGES:
Interest on long-term debt 76,279 82,394 236,148 262,571 317,212 358,175
Allowance for debt funds used during construction (2,882) (1,940) (9,216) (5,813) (11,674) (7,484)
Interest on interim obligations 4,229 3,898 12,647 12,971 15,206 15,557
Amortization of debt discount, premium and
expense, net 3,927 3,726 11,693 10,190 15,528 12,862
Other interest charges 6,830 7,187 19,909 43,174 24,125 46,563
---------- ---------- ---------- ---------- ---------- ----------
Net interest charges 88,383 95,265 271,181 323,093 360,397 425,673
---------- ---------- ---------- ---------- ---------- ----------
NET INCOME 245,372 257,076 466,016 532,629 553,915 632,961
DIVIDENDS ON PREFERRED STOCK 12,112 12,399 35,773 38,410 48,038 52,162
---------- ---------- ---------- ---------- ---------- ----------
NET INCOME AFTER DIVIDENDS ON
PREFERRED STOCK $ 233,260 $ 244,677 $ 430,243 $ 494,219 $ 505,877 $ 580,799
========== ========== ========== ========== ========== ==========
</TABLE>
( ) Denotes red figure.
The accompanying notes as they relate to GEORGIA are an integral part of these
condensed statements.
30
<PAGE> 31
GEORGIA POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Stated in Thousands of Dollars)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
-------------------
1994 1993
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 466,016 $ 532,629
Adjustments to reconcile net income to net cash provided by operating activities--
Depreciation and amortization 360,874 354,494
Deferred income taxes, net 30,869 74,260
Allowance for equity funds used during construction (4,450) (1,006)
Deferred Plant Vogtle costs 51,254 21,021
Provision for separation benefits 74,112 -
Gain on asset sales (22,474) (35,271)
Other, net (45,500) (6,327)
Changes in current assets and liabilities--
Receivables, net (5,021) (42,755)
Inventories (39,947) 57,990
Payables 8,076 (1,650)
Taxes accrued 11,027 131,607
Energy cost recovery, retail 36,139 (68,447)
Other 13,071 (19,247)
---------- ----------
NET CASH PROVIDED FROM OPERATING ACTIVITIES 934,046 997,298
---------- ----------
INVESTING ACTIVITIES
Property additions (420,025) (462,961)
Sales of property 132,644 253,032
Other (63,394) (50,788)
---------- ----------
NET CASH USED FOR INVESTING ACTIVITIES (350,775) (260,717)
---------- ----------
FINANCING ACTIVITIES
Proceeds--
Preferred stock - 75,000
First mortgage bonds - 1,135,000
Pollution control bonds 388,065 145,425
Retirements--
Preferred stock - (145,000)
First mortgage bonds (133,559) (1,239,309)
Pollution control bonds (391,810) (145,445)
Other long-term debt (132) (432)
Interim obligations, net (98,952) (164,877)
Payment of preferred stock dividends (35,001) (39,060)
Payment of common stock dividends (285,800) (301,300)
Miscellaneous (12,121) (59,405)
---------- ----------
NET CASH USED FOR FINANCING ACTIVITIES (569,310) (739,403)
---------- ----------
NET CHANGE IN CASH AND CASH EQUIVALENTS 13,961 (2,822)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 5,896 22,114
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 19,857 $ 19,292
========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION--
Interest (net of amount capitalized) $ 267,367 $ 340,407
Income taxes 300,417 178,038
</TABLE>
The accompanying notes as they relate to GEORGIA are an integral part of these
condensed statements.
31
<PAGE> 32
GEORGIA POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
ASSETS
<TABLE>
<CAPTION>
At September 30,
1994 At December 31,
(Unaudited) 1993
---------------- ---------------
<S> <C> <C>
UTILITY PLANT:
Plant in service (Note C) $13,914,703 $13,743,521
Less accumulated provision for depreciation 4,011,588 3,822,344
----------- -----------
9,903,115 9,921,177
Nuclear fuel, at amortized cost 142,542 135,742
Construction work in progress 545,611 584,013
----------- -----------
Total 10,591,268 10,640,932
OTHER PROPERTY AND INVESTMENTS:
SEGCO, at equity 27,784 29,201
Nuclear decommissioning trusts (Note C) 54,758 37,937
Miscellaneous 80,944 31,941
----------- -----------
Total 163,486 99,079
----------- -----------
CURRENT ASSETS:
Cash and cash equivalents 19,857 5,896
Receivables--
Customer accounts receivable 491,400 486,947
Other accounts and notes receivable 91,697 117,249
Affiliated companies 14,521 14,832
Accumulated provision for uncollectible accounts (5,300) (4,300)
Fossil fuel stock, at average cost 148,696 111,620
Materials and supplies, at average cost 290,422 287,551
Prepayments 75,726 65,269
Vacation pay deferred 40,158 41,575
----------- -----------
Total 1,167,177 1,126,639
----------- -----------
DEFERRED CHARGES:
Deferred charges related to income taxes 940,449 992,510
Deferred Plant Vogtle costs (Note F) 455,726 506,980
Debt expense and loss, being amortized 182,662 173,876
Miscellaneous 244,779 196,094
----------- -----------
Total 1,823,616 1,869,460
----------- -----------
TOTAL ASSETS $13,745,547 $13,736,110
=========== ===========
</TABLE>
The accompanying notes as they relate to GEORGIA are an integral part of these
condensed statements.
32
<PAGE> 33
GEORGIA POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
At September 30,
1994 At December 31,
(Unaudited) 1993
---------------- ---------------
<S> <C> <C>
CAPITALIZATION:
Common stock equity--
Common stock (without par value)-- authorized 15,000,000 shares,
outstanding 7,761,500 shares $ 344,250 $ 344,250
Paid-in capital 2,384,348 2,384,348
Premium on preferred stock 413 413
Retained earnings 1,425,541 1,316,447
----------- -----------
4,154,552 4,045,458
Preferred stock 692,787 692,787
Long-term debt 3,660,414 4,031,387
----------- -----------
Total 8,507,753 8,769,632
----------- -----------
CURRENT LIABILITIES:
Long-term debt due within one year 252,534 10,543
Notes payable to banks 240,655 406,700
Commercial paper 142,620 75,527
Accounts payable--
Affiliated companies 44,136 38,115
Other 297,561 285,929
Customer deposits 46,314 45,922
Taxes accrued--
Federal and state income 27,401 31,639
Other 137,120 121,854
Interest accrued 102,617 110,497
Miscellaneous 159,627 104,587
----------- -----------
Total 1,450,585 1,231,313
----------- -----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes 2,518,711 2,479,720
Accumulated deferred investment tax credits 461,716 478,334
Disallowed Plant Vogtle capacity buyback costs 55,610 63,067
Deferred credits related to income taxes 435,609 452,819
Miscellaneous 315,563 261,225
----------- -----------
Total 3,787,209 3,735,165
----------- -----------
TOTAL CAPITALIZATION AND LIABILITIES $13,745,547 $13,736,110
=========== ===========
</TABLE>
The accompanying notes as they relate to GEORGIA are an integral part of these
condensed statements.
33
<PAGE> 34
GEORGIA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
EARNINGS
GEORGIA's earnings for the third quarter of 1994 declined compared to the
corresponding quarter of 1993. Net income after dividends on preferred stock
was $233.3 million in the third quarter of 1994 and $244.7 million in the third
quarter of 1993. The decline is the result of lower retail revenues primarily
due to weather, partially offset by reductions in other operation expenses and
lower financing costs.
REVENUES
Total operating revenues decreased compared to the third quarter of 1993
because of the decrease in energy sales to retail and non-affiliated wholesale
customers. Excluding fuel clause revenues, which represent the pass-through of
fuel expenses and do not affect income, operating revenues for the third
quarter of 1994 decreased $96.6 million, compared to the corresponding period
of 1993.
Retail - Retail energy sales for the third quarter of 1994 decreased 6.0%.
The summer of 1993 was exceptionally hot, whereas the summer of 1994 was milder
than normal. Residential and commercial energy sales decreased 17.2% and 3.0%,
respectively, while industrial sales increased 1.4%. Total non-fuel retail
revenues decreased $92.2 million.
Wholesale - Energy sales to non-affiliated wholesale customers for the
third quarter of 1994 decreased 37.7%, compared to the corresponding period of
1993. Capacity revenues from non-affiliated utilities outside the service area
were down $6.4 million. These capacity revenues decreased as scheduled,
coinciding with GEORGIA completing the third sale in a series of four
transactions for the sale of Plant Scherer Unit 4 in June 1994. The final
transaction for the sale of this unit is scheduled for June 1995 and coincides
with scheduled reductions in capacity revenues of approximately $19 million in
1995 and an additional $11 million in 1996. Energy revenues from
non-affiliated utilities outside the service area decreased $10.5 million. The
energy component of contract sales is priced at approximately the variable
production cost and does not materially affect earnings.
Revenues from sales to affiliated companies within the Southern electric
system, as well as purchases of energy, will vary from period to period
depending on demand and the availability and cost of generating resources at
each company. These transactions do not have a significant impact on earnings.
34
<PAGE> 35
GEORGIA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS (Continued)
OPERATING EXPENSES
Fuel and Purchased Power - Fuel expense decreased primarily because of lower
generation, the displacement of coal-fired generation with lower cost hydro
generation and the lower cost of fuel. Purchased power expense for the third
quarter of 1994 decreased primarily due to GEORGIA purchasing less energy
because of lower demand and scheduled reductions in capacity buyback payments
to the co-owners of plants Vogtle and Scherer. See Note (F) to the Condensed
Financial Statements herein for information regarding the levelization of
capacity buyback expense for Plant Vogtle.
Other - Other operation expenses were down compared to the third quarter of
1993 due primarily to the recognition in 1993 of a one-time cost of
approximately $15 million for an automotive fleet reduction program,
environmental remediation costs at various locations of approximately $7
million in the third quarter of 1993, compared to approximately $2 million in
1994, and lower uncollectible accounts and pension expense during 1994. See
Note (M) to the Condensed Financial Statements herein for information regarding
work force reduction programs instituted in the first quarter of 1994 by
GEORGIA and SCS.
Maintenance expenses decreased because of the timing of scheduled
maintenance. The reduction in taxes other than income taxes was related to
lower revenues. Income taxes in the third quarter of 1993 were higher because
GEORGIA recorded additional income tax expense in 1993 in response to the
retroactive federal tax increase enacted in August 1993.
OTHER INCOME
In the third quarter of 1993, GEORGIA recognized a pre-tax loss of
approximately $10 million related to the impending shut-down of a coal receipt
and delivery facility.
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION
AFUDC represents the cost of capital charged to utility plant under
construction and is included in rate base. The equity portion of AFUDC
represents non-cash income. The amount of AFUDC has increased because of
GEORGIA's increased investment in the construction of combustion turbine
peaking units and, because of the rise in short-term interest rates, an
increase in the rate at which AFUDC is computed. Four of these peaking units
began commercial operation in 1994 with the other four units scheduled for
completion in 1995. Based upon GEORGIA's construction budget, AFUDC is
estimated to total $19 million in 1994 and $27 million in 1995.
35
<PAGE> 36
GEORGIA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS (Continued)
INTEREST CHARGES AND DIVIDENDS ON PREFERRED STOCK
Interest charges and preferred stock dividends have declined due to recent
refinancing efforts. Also, GEORGIA used the proceeds from the Plant Scherer
sales in 1993 and 1994 to redeem high cost securities.
FUTURE EARNINGS POTENTIAL
The results of operations discussed above are not necessarily indicative of
future earnings. The level of future earnings is contingent upon numerous
factors ranging from regulatory matters to growth in energy sales. Growth in
energy sales is subject to a number of factors which traditionally have
included changes in contracts with neighboring utilities, energy conservation
practiced by customers, the elasticity of demand, weather, competition, and the
rate of economic growth in GEORGIA's service area.
Pursuant to an Integrated Resource Plan approved by the Georgia PSC,
GEORGIA has implemented various demand-side option programs and had been
authorized by the Georgia PSC to recover associated program costs through rate
riders. In October 1993, a superior court judge ruled that recovery of these
costs through rate riders was unlawful. GEORGIA ceased collection of the rate
riders and the Georgia PSC allowed the deferral of program costs pending the
final outcome of this matter. In July 1994, the Georgia Court of Appeals
reversed the lower court's ruling concerning the rate riders. For additional
information on this matter, see Note (H) to the Condensed Financial Statements
herein.
The IRS has notified SOUTHERN that its tax accounting for the sale by
GEORGIA of a portion of Plant Vogtle in 1984 was improper. The potential tax
deficiency and interest arising from this issue amount to approximately $30
million and $33 million, respectively. The tax deficiency relates to a timing
issue as to when taxes are paid, therefore only the interest could impact
future income. In September 1994, GEORGIA deposited $46 million with the IRS
to prevent additional interest charges should GEORGIA's position on this issue
not prevail. See Note (I) to the Condensed Financial Statements herein for
further discussion of this matter.
In compliance with the recently enacted Georgia Hazardous Site Response
Act, the State of Georgia was required to compile an inventory of all sites
where hazardous wastes, constituents or substances have been disposed or
released in quantities deemed reportable by the State. In developing this
list, the State of Georgia identified several hundred properties throughout the
State, including 24 sites which may require environmental remediation by
GEORGIA. If all sites were required to be remediated, GEORGIA could incur
expenses of up to $23 million in additional clean-up costs and construction
expenditures of up to $100 million. See Note (K) to the Condensed Financial
Statements herein for further information on this matter.
36
<PAGE> 37
GEORGIA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS (Continued)
The addition of new peaking capacity in 1994 and 1995, as well as the Rocky
Mountain pumped storage hydroelectric project in 1995, will result in increased
operation, maintenance and depreciation expense. GEORGIA is scheduled to sell
its remaining ownership interest (16.55%) in Plant Scherer Unit 4 to Florida
Power & Light and the Jacksonville Electric Authority in June 1995. This
transaction will generate approximately $130 million in cash, including an
estimated after-tax gain of approximately $10 million. This transaction
coincides with scheduled reductions in capacity revenues from these utilities
under wholesale power contracts of approximately $19 million in 1995 and an
additional $11 million in 1996.
During the third quarter of 1994, OPC gave GEORGIA notice, as contractually
required, of its intent to decrease its purchases of capacity under a power
supply agreement. As a result, GEORGIA's capacity revenues from OPC will
decline approximately $7.5 million in 1996 and an additional $15.5 million in
1997.
OPC and MEAG have filed joint complaints in two separate venues seeking to
recover from GEORGIA approximately $16.5 million in alleged overcharges, plus
approximately $6.3 million in interest. See Note (J) to the Condensed
Financial Statements herein for further discussion of this matter.
The enactment of the Energy Act will have a profound effect on the future
of the electric utility industry. A discussion of the potential impact of the
Energy Act and particularly its effect on competition is found under "Future
Earnings Potential" in Item 7 - Management s Discussion and Analysis in
GEORGIA's 1993 Annual Report on Form 10-K.
The FERC has initiated proceedings concerning the equity returns on
wholesale power and transmission contracts. Management does not believe that
the final outcome of these proceedings will have a material adverse effect on
earnings. See Note (B) to the Condensed Financial Statements herein for
further information on this matter.
As described in Note (G) to the Condensed Financial Statements herein,
GEORGIA faces an uncertainty with respect to the actions of regulators
regarding the recovery of GEORGIA's investment in the Rocky Mountain pumped
storage hydroelectric project.
The staff of the SEC has questioned certain of the current accounting
practices of the electric utility industry regarding the recognition,
measurement and classification of decommissioning costs for nuclear generating
stations in financial statements. In response to these questions, the
Financial Accounting Standards Board has decided to review the accounting for
nuclear decommissioning. If current electric utility industry practices for
such decommissioning costs are changed: (1) annual provisions for
decommissioning could increase and (2) the total estimated cost for
decommissioning may be required to be recorded as a liability on the balance
37
<PAGE> 38
GEORGIA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS (Continued)
sheet. GEORGIA does not believe that such changes, if required, would have a
significant adverse effect on results of operations due to its current and
expected future ability to recover decommissioning costs through rates.
Further discussion of nuclear decommissioning costs is made in Note (C) to the
Condensed Financial Statements herein.
FINANCIAL CONDITION
OVERVIEW
The principal changes in GEORGIA's financial condition during the first nine
months of 1994 were additions of $420 million to utility plant, the commercial
operation of four 80-megawatt combustion turbine peaking units, the sale of a
portion of Plant Scherer Unit 4 and recognition of the liability associated
with the implementation of work force reduction programs. The funds needed for
gross property additions are currently provided from operations. See GEORGIA's
Condensed Statements of Cash Flows for further details.
CONSTRUCTION AND OTHER CAPITAL REQUIREMENTS
Estimated construction expenditures for the years 1994 through 1996 are $688
million, $551 million and $489 million, respectively. These estimated
expenditures reflect planned but unidentified reductions of $63 million in 1995
and $85 million in 1996 under GEORGIA's business strategy to curtail growth in
costs. Additionally, these estimated construction expenditures reflect
reductions of $4 million in 1995 and $140 million in 1996 as a result of
GEORGIA canceling the construction of eight combustion turbine generating units
originally scheduled for completion by 1997.
The Clean Air Act will have a significant impact on the capital
requirements of the Southern electric system. This legislation, as well as
other legislation and regulations are described under "Environmental Issues" in
Item 7 - Management's Discussion and Analysis in GEORGIA's 1993 Annual Report
on Form 10-K.
As a result of requirements by the NRC, GEORGIA has established external
sinking funds for the purpose of funding nuclear decommissioning costs. For
1994 through 1996, the amount to be funded for GEORGIA totals $16 million
annually. For additional information concerning nuclear decommissioning costs,
see Note (C) to the Condensed Financial Statements herein.
Cash requirements for long-term debt maturities and redemptions total
approximately $253 million for the twelve months ending September 30, 1995.
Short-term debt at quarter-end totaled $383 million.
38
<PAGE> 39
GEORGIA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FINANCIAL CONDITION (Continued)
SOURCES OF FUNDS
GEORGIA expects to meet future capital requirements primarily using funds from
operations and, if needed, by the issuance of new debt and equity securities,
term loans and short-term borrowings. Cash from operations for the first nine
months of 1994 decreased, as compared to the corresponding period in 1993,
primarily because of the receipt in 1993 of cash payments from Gulf States as
partial settlement of litigation and higher estimated income tax payments in
1994. The $46 million GEORGIA deposited with the IRS to prevent additional
interest charges related to the tax accounting for the property sale in 1984
was recorded in Other Property and Investments on the balance sheet.
GEORGIA must comply with coverage requirements of its mortgage indenture
and corporate charter to issue new first mortgage bonds and preferred stock.
GEORGIA's ability to satisfy all coverage requirements is such that it could
issue new first mortgage bonds and preferred stock to provide sufficient funds
for all anticipated requirements.
To meet short-term cash needs and contingencies, GEORGIA had approximately
$473 million of unused credit arrangements with banks at September 30, 1994.
Additionally, the completion of the remaining transaction for the sale of Plant
Scherer Unit 4 will generate approximately $130 million in 1995.
39
<PAGE> 40
ARTHUR ANDERSEN LLP
Exhibit 1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO GEORGIA POWER COMPANY:
We have reviewed the accompanying condensed balance sheet of GEORGIA POWER
COMPANY (a Georgia corporation) as of September 30, 1994, and the related
condensed statements of income for the three-month, nine-month and twelve-month
periods ended September 30, 1994 and 1993, and the condensed statements of cash
flows for the nine-month periods ended September 30, 1994 and 1993. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
As more fully discussed in Note (G) to the Condensed Financial Statements,
an uncertainty exists with respect to the actions of the regulators regarding
the recoverability of the Company's investment in the Rocky Mountain pumped
storage hydroelectric project. The outcome of this uncertainty cannot
presently be determined. Accordingly, no provision for any writedown of the
costs associated with the Rocky Mountain facility resulting from the potential
actions of the Georgia Public Service Commission has been made in the
accompanying Condensed Financial Statements.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of GEORGIA POWER COMPANY as of December 31, 1993
(not presented herein), and, in our report dated February 16, 1994, we included
an explanatory paragraph which describes an uncertainty with respect to the
actions of the regulators regarding the recoverability of the Company's
investment in the Rocky Mountain pumped storage hydroelectric project. In our
opinion, the information set forth in the accompanying condensed balance sheet
as of December 31, 1993, 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
November 9, 1994
40
<PAGE> 41
GULF POWER COMPANY
41
<PAGE> 42
GULF POWER COMPANY
MANAGEMENT'S OPINION AS TO FAIR STATEMENT OF RESULTS
The condensed financial statements of GULF included herein have been
prepared by GULF, without audit, pursuant to the rules and regulations of the
SEC. In the opinion of GULF's management, the information regarding GULF
furnished herein reflects all adjustments (which included only normal recurring
adjustments) necessary to present fairly the results for the periods ended
September 30, 1994 and 1993. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations, although GULF believes that the disclosures regarding
GULF are adequate to make the information presented not misleading. It is
suggested that these condensed financial statements be read in conjunction with
the financial statements and the notes thereto included in GULF's latest annual
report on Form 10-K.
42
<PAGE> 43
GULF POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Stated in Thousands of Dollars)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months For the Twelve Months
Ended September 30, Ended September 30, Ended September 30,
------------------- ------------------- -------------------
1994 1993 1994 1993 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Revenues $157,637 $166,342 $432,530 $424,512 $567,994 $559,491
Revenues from affiliates 4,506 9,622 14,470 17,351 20,285 26,829
-------- -------- -------- -------- -------- --------
Total operating revenues 162,143 175,964 447,000 441,863 588,279 586,320
-------- -------- -------- -------- -------- --------
OPERATING EXPENSES:
Operation--
Fuel 48,273 60,131 125,377 137,481 158,381 184,548
Purchased power from non-affiliates 1,234 2,462 4,933 3,043 6,276 3,363
Purchased power from affiliates 6,002 2,788 18,776 19,701 31,348 26,264
Other 26,488 29,074 90,090 77,894 121,360 104,796
Maintenance 9,469 9,657 37,628 38,891 44,741 51,869
Depreciation and amortization 14,453 13,863 42,427 41,277 56,459 54,613
Taxes other than income taxes 11,399 11,125 32,044 29,880 42,368 39,446
Federal and state income taxes 13,702 14,081 25,491 23,705 34,516 30,498
-------- -------- -------- -------- -------- --------
Total operating expenses 131,020 143,181 376,766 371,872 495,449 495,397
-------- -------- -------- -------- -------- --------
OPERATING INCOME 31,123 32,783 70,234 69,991 92,830 90,923
OTHER INCOME (EXPENSE):
Allowance for equity funds used during construction 129 96 401 205 707 212
Interest income 346 339 1,109 1,021 1,416 1,647
Other, net (100) (231) (268) (523) (981) (1,911)
Gain on sale of investment securities - - - 3,820 - 3,820
Income taxes applicable to other income (190) (43) (447) (1,584) 215 (648)
-------- -------- -------- -------- -------- --------
INCOME BEFORE INTEREST CHARGES 31,308 32,944 71,029 72,930 94,187 94,043
-------- -------- -------- -------- -------- --------
INTEREST CHARGES:
Interest on long-term debt 6,838 8,445 20,586 24,190 27,740 32,028
Allowance for debt funds used during construction (158) (228) (491) (492) (453) (515)
Interest on notes payable 443 264 1,101 846 1,125 1,095
Amortization of debt discount, premium and expense, net 456 378 1,360 1,000 1,772 1,292
Other interest charges 411 333 3,221 3,113 2,986 3,503
-------- -------- -------- -------- -------- --------
Net interest charges 7,990 9,192 25,777 28,657 33,170 37,403
-------- -------- -------- -------- -------- --------
NET INCOME 23,318 23,752 45,252 44,273 61,017 56,640
DIVIDENDS ON PREFERRED STOCK 1,487 1,386 4,418 4,169 5,976 5,585
-------- -------- -------- -------- -------- --------
NET INCOME AFTER DIVIDENDS ON
PREFERRED STOCK $ 21,831 $ 22,366 $ 40,834 $ 40,104 $ 55,041 $ 51,055
======== ======== ======== ======== ======== ========
</TABLE>
The accompanying notes as they relate to GULF are an integral part of these
condensed statements.
43
<PAGE> 44
GULF POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Stated in Thousands of Dollars)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
-------------------
1994 1993
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 45,252 $ 44,273
Adjustments to reconcile net income to net cash provided by operating activities--
Depreciation and amortization 67,292 55,996
Deferred income taxes, net (4,836) 1,271
Allowance for equity funds used during construction (401) (205)
Other, net 5,189 221
Changes in certain current assets and liabilities--
Receivables, net (713) 3,387
Inventories (5,267) 14,186
Payables (6,596) (3,902)
Other 17,196 9,196
-------- --------
Net Cash Provided From Operating Activities 117,116 124,423
-------- --------
INVESTING ACTIVITIES:
Gross property additions (63,344) (50,041)
Other (3,303) (14,756)
-------- --------
Net Cash Used For Investing Activities (66,647) (64,797)
-------- --------
FINANCING ACTIVITIES:
Proceeds:
Preferred stock - 20,000
First mortgage bonds - 75,000
Pollution control bonds 42,000 45,550
Other long-term debt 32,108 -
Retirements:
Preferred stock subject to mandatory redemption (1,000) (1,000)
First mortgage bonds (48,856) (62,092)
Pollution control bonds - (32,675)
Other long-term debt (19,950) (7,522)
Special deposits-redemption funds (42,169) (20,000)
Notes payable, net 21,447 (34,000)
Payment of preferred stock dividends (4,418) (4,170)
Payment of common stock dividends (32,900) (31,300)
Miscellaneous (1,381) (4,935)
-------- --------
Net Cash Used For Financing Activities (55,119) (57,144)
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS (4,650) 2,482
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,576 1,204
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 926 $ 3,686
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amounts capitalized) $ 20,002 $ 17,623
Income taxes 24,595 21,303
</TABLE>
The accompanying notes as they relate to GULF are an integral part of these
condensed statements.
44
<PAGE> 45
GULF POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
ASSETS
<TABLE>
<CAPTION>
At September 30,
1994 At December 31,
(Unaudited) 1993
---------------- ---------------
<S> <C> <C>
UTILITY PLANT:
Plant in service, at original cost $1,646,506 $1,611,704
Less accumulated provision for depreciation 643,299 610,542
---------- ----------
1,003,207 1,001,162
Construction work in progress 53,233 34,591
---------- ----------
Total 1,056,440 1,035,753
---------- ----------
OTHER PROPERTY AND INVESTMENTS 8,174 13,242
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents 926 5,576
Special deposits - redemption funds 42,169 -
Receivables--
Customer accounts receivable 62,067 57,226
Other accounts and notes receivable 2,820 5,904
Affiliated companies 329 1,241
Accumulated provision for uncollectible accounts (579) (447)
Fuel stock, at average cost 26,569 20,652
Materials and supplies, at average cost 35,740 36,390
Current portion of deferred coal contract costs 2,510 12,535
Regulatory clauses under recovery 6,032 3,244
Prepayments 2,323 2,160
Vacation pay deferred 4,022 4,022
---------- ----------
Total 184,928 148,503
---------- ----------
DEFERRED CHARGES:
Deferred charges related to income taxes 30,677 31,334
Debt expense and loss, being amortized 20,868 21,247
Deferred coal contract costs 41,341 52,884
Miscellaneous 5,606 4,846
---------- ----------
Total 98,492 110,311
---------- ----------
TOTAL ASSETS $1,348,034 $1,307,809
========== ==========
</TABLE>
The accompanying notes as they relate to GULF are an integral part of these
condensed statements.
45
<PAGE> 46
GULF POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
At September 30,
1994 At December 31,
(Unaudited) 1993
---------------- ---------------
<S> <C> <C>
CAPITALIZATION:
Common stock equity--
Common stock (without par value)--authorized
and outstanding 992,717 shares $ 38,060 $ 38,060
Paid-in capital 218,282 218,282
Premium on preferred stock 81 81
Retained earnings 165,656 157,773
---------- ----------
422,079 414,196
Preferred stock 89,602 89,602
Preferred stock subject to mandatory redemption - 1,000
Long-term debt 360,322 369,259
---------- ----------
Total 872,003 874,057
---------- ----------
CURRENT LIABILITIES:
Preferred stock due within one year 1,000 1,000
Long-term debt due within one year 55,443 41,552
Notes payable 27,500 6,053
Accounts payable--
Affiliated companies 7,899 18,560
Other 18,570 20,139
Customer deposits 13,920 15,082
Taxes accrued--
Federal and state income 12,903 10,330
Other 16,010 2,685
Interest accrued 10,007 5,420
Regulatory clauses over recovery 420 840
Vacation pay accrued 4,022 4,022
Miscellaneous 5,775 8,527
---------- ----------
Total 173,469 134,210
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes 153,320 151,743
Deferred credits related to income taxes 73,419 76,876
Accumulated deferred investment tax credits 38,983 40,770
Accumulated provision for property damage 11,644 10,509
Accumulated provision for postretirement benefits 13,114 10,749
Miscellaneous 12,082 8,895
---------- ----------
Total 302,562 299,542
---------- ----------
TOTAL CAPITALIZATION AND LIABILITIES $1,348,034 $1,307,809
========== ==========
</TABLE>
The accompanying notes as they relate to GULF are an integral part of these
condensed statements.
46
<PAGE> 47
GULF POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
EARNINGS
GULF's net income after dividends on preferred stock for the third quarter of
1994 was $21.8 million, compared to $22.4 million for the same period of 1993.
The decline in earnings was primarily due to lower revenues partially offset by
lower operation expenses and capital costs.
REVENUES
Retail energy sales for the third quarter of 1994 decreased 5.6% from the
corresponding period of 1993 due primarily to the mild temperatures experienced
during the summer of 1994 in contrast to a hotter than normal summer of 1993.
Also, energy sales were reduced because GULF's formerly largest industrial
customer began operating its co-generation facility in August 1993. Wholesale
energy sales to non-affiliates decreased 1.0% with capacity revenues $1.2
million lower, compared to the third quarter of 1993.
EXPENSES
Fuel expenses for the third quarter of 1994 decreased compared to the same
period of 1993 due to a 13.6% decrease in generation. Additionally, because
GULF renegotiated, bought out or otherwise terminated various coal supply
contracts, the average cost of fuel consumed decreased. Purchased power
transactions (both sales and purchases) among the affiliated companies within
the Southern electric system will vary from period to period depending on
demand and the availability and cost of generation at each company. Other
operation expenses decreased because of the reduction of costs associated with
the buyouts and renegotiation of coal supply contracts. The expenses
recognized are based, in part, on the amount of fuel consumed at the generating
plants. These costs are recoverable through the fuel clause and, thus, have no
impact on earnings. Also, other operation expenses decreased due to a
reduction in expenses related to employee benefits. Additionally, the third
quarter of 1993 included the one-time costs associated with a automobile fleet
reduction program. The decrease in income tax expense is attributable to lower
earnings.
INTEREST CHARGES AND DIVIDENDS ON PREFERRED STOCK
The decrease in interest on long-term debt reflects GULF's efforts to decrease
its capital costs. GULF, in response to the low interest rate levels
prevailing during 1992 and 1993, refinanced a significant portion of its
long-term debt and preferred stock. To the extent it is economically feasible,
GULF will continue its efforts to lower its capital costs.
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 regulatory matters to growth in energy sales.
47
<PAGE> 48
GULF POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS (Continued)
Future earnings in the near term will also depend upon growth in electric
sales which are subject to a number of factors. Traditionally, these factors
have included changes in contracts with neighboring utilities, energy
conservation practiced by customers, the elasticity of demand, weather,
competition, customer growth, and the rate of economic growth in GULF's service
area. The enactment of the Energy Act will have a profound effect on the
future of the electric utility industry. A discussion of the potential impact
of the Energy Act and particularly its effect on competition is found under
"Future Earnings Potential" in Item 7 - Management's Discussion and Analysis in
GULF's 1993 Annual Report on Form 10-K.
See Note (B) to the Condensed Financial Statements herein for a discussion
of the hearings ordered by the FERC regarding the reasonableness of the return
on common equity on certain of the Southern electric system's wholesale rate
schedules and contracts. Also, see Note (L) to the Condensed Financial
Statements herein for a discussion of the settlement of a suit filed against
GULF concerning fuel transportation.
Compliance costs related to the Clean Air Act could reduce earnings if such
increased costs are not fully recovered. The Clean Air Act is discussed
further under "Environmental Matters" in Item 7 - Management's Discussion and
Analysis in GULF's 1993 Annual Report on Form 10-K. See Note 3 to the
financial statements in Item 8 in GULF's 1993 Annual Report on Form 10-K for a
discussion of the Environmental Cost Recovery clause which provides for the
expected recovery of such costs.
FINANCIAL CONDITION
OVERVIEW
The major changes in GULF's financial condition during the first nine months of
1994 were gross property additions of $63.3 million and the settlement of
litigation related to fuel transportation. The principal sources of funds for
these additions and other capital requirements were provided from operations
and an increase in notes payable. See the Condensed Statements of Cash Flows
for further details.
CAPITAL REQUIREMENTS FOR CONSTRUCTION
GULF's gross property additions, including those amounts related to
environmental compliance, are estimated to total approximately $219 million for
the three years 1994 through 1996 ($81 million in 1994, $62 million in 1995 and
$76 million in 1996). The estimates of property additions for the three-year
period include $23 million committed to meeting the requirements of the Clean
Air Act, the cost of which is expected to be recovered through the
Environmental Cost Recovery clause. Actual construction costs may vary from
these estimates because of factors such as the granting of timely and adequate
rate increases, changes in environmental regulations, revised load projections,
the cost and efficiency of construction labor, equipment, and materials, and
the cost of capital.
48
<PAGE> 49
GULF POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FINANCIAL CONDITION (Continued)
Various environmental legislation and other related regulations are
described in "Environmental Matters" in Item 7 - Management's Discussion and
Analysis in GULF's 1993 Annual Report on Form 10-K. The full impact of these
requirements cannot be determined at this time, pending the development and
implementation of applicable regulations.
In addition to the funds required for the construction program, $56.4
million will be required by September 30, 1995, in connection with maturities
and redemptions of long-term debt and preferred stock subject to mandatory
redemption. This amount includes approximately $42.0 million of pollution
control bonds that have been refinanced and will be redeemed December 1, 1994.
The funds for these redemptions are on deposit with the Trustee and are
designated for that purpose only.
At September 30, 1994, GULF had $0.9 million of cash and $67.3 million of
unused credit arrangements with banks to meet its short-term cash needs. GULF
had $27.5 million of short-term bank borrowings outstanding at quarter-end.
It is anticipated that the funds required for construction and other
purposes, including compliance with environmental regulations, will be derived
from operations, the sale of additional first mortgage bonds and preferred
stock, and capital contributions from SOUTHERN. GULF is required to meet
certain coverage requirements specified in its mortgage indenture and corporate
charter to issue new first mortgage bonds and preferred stock. GULF's coverage
ratios are sufficient to permit, at present interest rate levels, any
foreseeable security sales. The amount of securities which GULF will be
permitted to issue in the future will depend upon market conditions and other
factors prevailing at that time.
49
<PAGE> 50
MISSISSIPPI POWER COMPANY
50
<PAGE> 51
MISSISSIPPI POWER COMPANY
MANAGEMENT'S OPINION AS TO FAIR STATEMENT OF RESULTS
The condensed financial statements of MISSISSIPPI included herein have been
prepared by MISSISSIPPI, without audit, pursuant to the rules and regulations
of the SEC. In the opinion of MISSISSIPPI's management, the information
regarding MISSISSIPPI furnished herein reflects all adjustments (which included
only normal recurring adjustments) necessary to present fairly the results for
the periods ended September 30, 1994 and 1993. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although MISSISSIPPI believes
that the disclosures regarding MISSISSIPPI are adequate to make the information
presented not misleading. It is suggested that these condensed financial
statements be read in conjunction with the financial statements and the notes
thereto included in MISSISSIPPI's latest annual report on Form 10-K.
51
<PAGE> 52
MISSISSIPPI POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Stated in Thousands of Dollars)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months For the Twelve Months
Ended September 30, Ended September 30, Ended September 30,
------------------- ------------------- -------------------
1994 1993 1994 1993 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Revenues $140,191 $142,115 $380,777 $353,220 $486,922 $452,819
Revenues from affiliates 2,149 5,987 7,489 14,198 8,809 15,897
-------- -------- -------- -------- -------- --------
Total operating revenues 142,340 148,102 388,266 367,418 495,731 468,716
-------- -------- -------- -------- -------- --------
OPERATING EXPENSES:
Operation--
Fuel 36,756 40,665 81,084 91,652 103,417 109,595
Purchased power from non-affiliates 367 1,298 2,152 1,811 2,539 2,101
Purchased power from affiliates 10,877 14,197 53,886 41,836 70,069 59,363
Other 24,705 29,639 71,177 76,186 95,374 99,893
Maintenance 9,913 10,322 35,683 32,629 47,055 43,785
Depreciation and amortization 8,945 8,844 27,189 26,474 33,814 35,106
Taxes other than income taxes 10,938 10,018 31,153 27,842 40,456 35,903
Federal and state income taxes 13,627 10,742 26,929 18,935 30,661 21,950
-------- -------- -------- -------- -------- --------
Total operating expenses 116,128 125,725 329,253 317,365 423,385 407,696
-------- -------- -------- -------- -------- --------
OPERATING INCOME 26,212 22,377 59,013 50,053 72,346 61,020
OTHER INCOME (EXPENSE):
Allowance for equity funds used
during construction 263 201 939 465 1,484 548
Other, net 243 1,068 3,073 3,167 4,395 4,630
Income taxes applicable to other income 31 (225) (739) (1,264) (633) (1,606)
-------- -------- -------- -------- -------- --------
INCOME BEFORE INTEREST CHARGES 26,749 23,421 62,286 52,421 77,592 64,592
-------- -------- -------- -------- -------- --------
INTEREST CHARGES:
Interest on long-term debt 3,460 5,005 13,586 13,539 17,737 17,681
Allowance for debt funds used during construction (180) (260) (882) (474) (1,196) (646)
Interest on notes payable 412 234 1,163 769 1,394 958
Amortization of debt discount, premium and expense, net 372 334 1,101 923 1,439 1,178
Other interest charges 103 84 277 653 352 695
-------- -------- -------- -------- -------- --------
Net interest charges 4,167 5,397 15,245 15,410 19,726 19,866
-------- -------- -------- -------- -------- --------
NET INCOME 22,582 18,024 47,041 37,011 57,866 44,726
DIVIDENDS ON PREFERRED STOCK 1,225 1,464 3,674 4,175 4,899 5,531
-------- -------- -------- -------- -------- --------
NET INCOME AFTER DIVIDENDS ON
PREFERRED STOCK $ 21,357 $ 16,560 $ 43,367 $ 32,836 $ 52,967 $ 39,195
======== ======== ======== ======== ======== ========
</TABLE>
( ) Denotes negative figure.
The accompanying notes as they relate to MISSISSIPPI are an integral part of
these condensed statements.
52
<PAGE> 53
MISSISSIPPI POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Stated in Thousands of Dollars)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
-------------------
1994 1993
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 47,041 $ 37,011
Adjustments to reconcile net income to net cash provided by operating activities--
Depreciation and amortization 36,449 37,578
Deferred income taxes, net (849) 689
Allowance for equity funds used during construction (939) (465)
Other, net (524) (1,945)
Change in certain current assets and liabilities--
Receivables, net (8,746) (12,293)
Inventories (5,972) 11,712
Payables (5,920) 5,426
Taxes accrued 6,243 (1,382)
Other 4,953 1,114
-------- ---------
Net cash provided from operating activities 71,736 77,445
-------- ---------
INVESTING ACTIVITIES:
Gross property additions (81,175) (87,447)
Other (15,817) (14,515)
-------- ---------
Net cash used for investing activities (96,992) (101,962)
-------- ---------
FINANCING ACTIVITIES:
Proceeds--
Capital contributions from parent company 25,000 30,000
Preferred stock - 23,404
First mortgage bonds 35,000 70,000
Pollution control bonds - 13,000
Other long-term debt 50,309 -
Retirements--
Preferred stock - (23,404)
First mortgage bonds (32,371) (51,300)
Other long-term debt (7,108) (7,844)
Notes payable, net (15,000) (1,000)
Payment of preferred stock dividends (3,674) (4,175)
Payment of common stock dividends (25,500) (21,700)
Miscellaneous (1,182) (5,184)
-------- ---------
Net cash provided (used) from financings 25,474 21,797
-------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS 218 (2,720)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 878 7,417
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,096 $ 4,697
======== =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for--
Interest (net of amount capitalized) $ 13,574 $ 12,426
Income taxes 15,177 16,851
</TABLE>
The accompanying notes as they relate to MISSISSIPPI are an integral part of
these condensed statements.
53
<PAGE> 54
MISSISSIPPI POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
ASSETS
<TABLE>
<CAPTION>
At September 30,
1994 At December 31,
(Unaudited) 1993
------------- -------------
<S> <C> <C>
UTILITY PLANT:
Plant in service, at original cost $1,352,609 $1,238,847
Less accumulated provision for depreciation 472,354 462,725
---------- ----------
Total 880,255 776,122
Construction work in progress 58,845 108,063
---------- ----------
Total 939,100 884,185
---------- ----------
OTHER PROPERTY AND INVESTMENTS 6,367 11,289
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents 1,096 878
Receivables--
Customer accounts receivable 39,039 31,376
Other accounts and notes receivable 6,156 5,581
Affiliated companies 7,348 6,698
Accumulated provision for uncollectible accounts (879) (737)
Fuel stock, at average cost 12,967 11,185
Materials and supplies, at average cost 25,335 21,145
Current portion of deferred fuel charges 791 440
Prepayments 5,550 7,843
Vacation pay deferred 4,797 4,797
---------- ----------
Total 102,200 89,206
---------- ----------
DEFERRED CHARGES:
Deferred charges related to income taxes 25,196 25,267
Deferred fuel charges 11,070 17,520
Debt expense and loss, being amortized 11,205 11,666
Deferred early retirement program costs (Note M) 14,286 -
Miscellaneous 13,340 10,073
---------- ----------
Total 75,097 64,526
---------- ----------
TOTAL ASSETS $1,122,764 $1,049,206
========== ==========
</TABLE>
The accompanying notes as they relate to MISSISSIPPI are an integral part of
these condensed statements.
54
<PAGE> 55
MISSISSIPPI POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
At September 30,
1994 At December 31,
(Unaudited) 1993
-------------- --------------
<S> <C> <C>
CAPITALIZATION:
Common stock equity--
Common stock (without par value), authorized 1,130,000 shares,
outstanding 1,121,000 shares $ 37,691 $ 37,691
Paid-in capital 179,362 154,362
Premium on preferred stock 372 372
Retained earnings 148,104 129,343
---------- ----------
365,529 321,768
Cumulative preferred stock 74,414 74,414
Long-term debt 274,019 250,391
---------- ----------
Total 713,962 646,573
---------- ----------
CURRENT LIABILITIES:
Long-term debt due within one year 41,077 19,345
Notes payable 25,000 40,000
Accounts payable--
Affiliated companies 4,229 10,197
Other 32,592 50,731
Customer deposits 2,714 2,786
Taxes accrued--
Federal and state income 8,681 186
Other 24,700 26,952
Interest accrued 4,598 4,237
Miscellaneous 15,259 14,120
---------- ----------
Total 158,850 168,554
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes 125,754 123,206
Accumulated deferred investment tax credits 31,599 32,710
Deferred credits related to income taxes 46,606 48,228
Accumulated provision for property damage 10,530 10,538
Miscellaneous 35,463 19,397
---------- ----------
Total 249,952 234,079
---------- ----------
TOTAL CAPITALIZATION AND LIABILITIES $1,122,764 $1,049,206
========== ==========
</TABLE>
The accompanying notes as they relate to MISSISSIPPI are an integral part of
these condensed statements.
55
<PAGE> 56
MISSISSIPPI POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
NET INCOME
MISSISSIPPI's net income after dividends on preferred stock for the third
quarter of 1994 was $21.4 million, compared to $16.6 million for the
corresponding period of 1993. Net income rose primarily because of lower other
operation expenses and capital costs.
REVENUES
Revenues for the third quarter of 1994 decreased, compared to the same period
of 1993, because of milder than normal weather during the summer of 1994.
Because of lower demand for both MISSISSIPPI and the SOUTHERN system,
MISSISSIPPI relied on its most cost efficient generating facilities and had
access to lower cost energy from other sources, which translated into lower
fuel clause revenues. Despite the milder temperatures during the summer of
1994, contrasted with above average temperatures in the summer of 1993, retail
energy sales increased 0.7% and territorial wholesale energy sales increased
0.6%. These increased energy sales reflect an improving economy in coastal
Mississippi due in large measure to an increasing number of casinos and
ancillary services and the attendant rise in personal income. Energy sales to
industrial customers increased 5.9%.
EXPENSES
Fuel and purchased power expense declined in the third quarter of 1994 due to
weather effects during the summer months. The cooler temperatures resulted in
less purchases of energy and fuel. Fuel expenses also decreased because of the
lower average cost of fuel consumed. Purchased power transactions (both sales
and purchases) among the affiliated companies within the Southern electric
system will vary from period to period depending on demand and the availability
and cost of generation at each company.
Other operation expenses decreased due to lower sales, marketing and
administrative expenses, reduced billings from the system service company,
decreased expenses associated with a fuel supply contract buyout, and, in
response to updated actuarial estimates, lower pension and other postretirement
benefit costs. Taxes other than income taxes increased because of additions to
utility plant. The increase in income tax expense reflects the increase in
earnings. The decrease in interest expense was due primarily to refinancings.
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION
AFUDC represents the cost of capital charged to utility plant under
construction. The equity portion of AFUDC represents non-cash income.
However, when facilities are completed and included in rate base, previously
capitalized amounts increase cash flow because revenues are higher as a result
of the increased rate base and additional depreciation expense. In May 1994,
MISSISSIPPI began commercial operation of a 74.6-megawatt combustion turbine
unit whose entire output is dedicated to a single industrial customer. The
recording of AFUDC for a construction project ceases upon commercial operation
of the project.
56
<PAGE> 57
MISSISSIPPI POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS (Continued)
OTHER INCOME
Included in "Other, net" for the third quarter of 1994 is $1.0 million to fund
a program to encourage employee use of electric products and upgrade energy
efficiency.
FUTURE EARNINGS POTENTIAL
The results of operations discussed above are not necessarily indicative of
future earnings potential. The level of future earnings is contingent upon
numerous factors ranging from regulatory matters to growth in energy sales.
Operating revenues will be affected by 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. Also see Note (B) to the
Condensed Financial Statements herein for information regarding FERC's review
of equity returns.
MISSISSIPPI's 1994 annual filing under the ECO Plan with the Mississippi
PSC resulted in an approved annual revenue requirement increase of $7.6
million, effective in April 1994. The FERC approved MISSISSIPPI's wholesale
rate increase petition for $3.6 million, effective April 1994.
The Mississippi PSC has increased from $10.9 million to $18 million, the
maximum amount MISSISSIPPI may accumulate in its Property Damage Reserve. The
monthly accrual for this reserve did not change.
MISSISSIPPI initiated an early retirement incentive program in April 1994.
The costs associated with this program, as well as MISSISSIPPI's pro rata share
of a similar program at SCS, have been deferred. For further information on
these programs and the accounting treatment, see Note (M) to the Condensed
Financial Statements herein.
Future earnings in the near term will also depend upon growth in electric
sales which are subject to a number of factors. Traditionally, these factors
have included the rate of economic growth in MISSISSIPPI's service area,
customer growth, competition, weather, changes in contracts with neighboring
utilities, energy conservation practiced by customers, and the elasticity of
demand. The enactment of the Energy Act will have a profound effect on the
future of the electric utility industry. A discussion of the potential impact
of the Energy Act and particularly its effect on competition is found under
"Future Earnings Potential" in Item 7 - Management's Discussion and Analysis in
MISSISSIPPI's 1993 Annual Report on Form 10-K.
FINANCIAL CONDITION
OVERVIEW
During the first nine months of 1994, gross property additions were $81.2
million. The funds for these additions and other capital requirements,
including refundings, were derived primarily from internal sources, the sale of
$35 million of first mortgage bonds, the issuance of $50 million of long-term
notes
57
<PAGE> 58
MISSISSIPPI POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FINANCIAL CONDITION (Continued)
payable and the receipt of $25 million in capital contributions from SOUTHERN.
See the Condensed Statements of Cash Flows for further details.
At September 30, 1994, cash totaled approximately $1.1 million and
MISSISSIPPI had $96.5 million of unused credit arrangements with banks to meet
short-term cash needs. MISSISSIPPI had $25 million of notes payable
outstanding at quarter-end. It is MISSISSIPPI's strategy to maintain a
permanent layer of short-term debt, approximately $40 million through the end
of 1994, consistent with its overall risk capital strategy.
CAPITAL REQUIREMENTS
MISSISSIPPI's gross property additions for the next three years are estimated
to be $256 million ($96 million in 1994, $62 million in 1995 and $98 million in
1996). The major emphasis within the construction program will be on complying
with Clean Air Act regulations and upgrading existing facilities. Revisions
may be necessary because of factors such as revised load projections, the
availability and cost of capital and changes in environmental regulations.
In addition to the funds required for the construction program,
approximately $41.1 million will be required by September 30, 1995, for
maturities of long-term debt. It is anticipated that the funds required for
construction and other purposes, including compliance with environmental
regulations, will be derived from operations, the sale of additional first
mortgage bonds, pollution control bonds and preferred stock and the receipt of
additional capital contributions from SOUTHERN. MISSISSIPPI is required to
meet certain coverage requirements specified in its mortgage indenture and
corporate charter to issue new first mortgage bonds and preferred stock.
MISSISSIPPI's coverage ratios are sufficiently high to permit, at present
interest rate levels, any foreseeable security sales. The amount of securities
which MISSISSIPPI will be able to issue in the future will depend upon market
conditions and other factors prevailing at that time.
ENVIRONMENTAL MATTERS
Changes in environmental regulations could substantially increase the Southern
electric system's capital requirements and operating costs. The acid rain
compliance provision of the Clean Air Act will have a significant impact on the
Southern electric system. This legislation, as well as other legislation and
regulations, are described under "Environmental Matters" in Item 7 -
Management's Discussion and Analysis in MISSISSIPPI's 1993 Annual Report on
Form 10-K. The full impact of these requirements cannot be determined at this
time pending the development MISSISSIPPI's management believes that the ECO
Plan will provide for retail recovery of the Clean Air Act costs.
MISSISSIPPI must comply with environmental laws and regulations that cover
the handling and disposal of hazardous waste. Under these various laws and
regulations, MISSISSIPPI could incur costs to clean up properties currently or
previously owned. Upon identifying potential sites
58
<PAGE> 59
MISSISSIPPI POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FINANCIAL CONDITION (Continued)
MISSISSIPPI conducts studies, when possible, to determine the extent of any
required clean-up costs. Should remediation be determined to be probable,
reasonable estimates of costs to clean up such sites are developed and
recognized in the financial statements. A currently owned site where
manufactured gas plant operations were located is under investigation for
potential remediation, but no prediction can presently be made regarding the
extent, if any, of contamination or possible cleanup. If this site were
required to be remediated, industry studies show MISSISSIPPI could incur
clean-up costs of from $1.5 million to $10 million before giving consideration
of possible recovery of clean-up costs from other parties.
59
<PAGE> 60
SAVANNAH ELECTRIC
AND
POWER COMPANY
60
<PAGE> 61
SAVANNAH ELECTRIC AND POWER COMPANY
MANAGEMENT'S OPINION AS TO FAIR STATEMENT OF RESULTS
The condensed financial statements of SAVANNAH included herein have been
prepared by SAVANNAH, without audit, pursuant to the rules and regulations of
the SEC. In the opinion of SAVANNAH's management, the information regarding
SAVANNAH furnished herein reflects all adjustments (which, except for the
provision for separation benefits, included only normal recurring adjustments)
necessary to present fairly the results for the periods ended September 30,
1994 and 1993. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although SAVANNAH believes that the disclosures regarding SAVANNAH
are adequate to make the information presented not misleading. It is suggested
that these condensed financial statements be read in conjunction with the
financial statements and the notes thereto included in SAVANNAH's latest annual
report on Form 10-K.
61
<PAGE> 62
SAVANNAH ELECTRIC AND POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Stated in Thousands of Dollars)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months For the Twelve Months
Ended September 30, Ended September 30, Ended September 30,
------------------- ------------------- -------------------
1994 1993 1994 1993 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Revenues $61,264 $72,901 $162,761 $168,005 $210,764 $209,513
Revenues from affiliates 2,410 1,519 4,007 2,163 4,278 2,719
------- ------- -------- -------- -------- --------
Total operating revenues 63,674 74,420 166,768 170,168 215,042 212,232
------- ------- -------- -------- -------- --------
OPERATING EXPENSES:
Operation--
Fuel 7,220 15,195 16,545 23,878 17,643 24,801
Purchased power from non-affiliates 134 446 1,577 651 1,719 759
Purchased power from affiliates 14,182 13,197 43,063 39,007 60,330 53,293
Provision for separation benefits (186) 4,100 365 4,100 720 4,100
Other 10,854 10,242 30,116 29,534 41,737 39,623
Maintenance 3,530 3,563 9,161 9,872 12,804 14,336
Depreciation and amortization 4,616 4,226 13,238 12,383 17,323 16,597
Taxes other than income taxes 3,096 2,924 8,363 8,034 11,465 10,791
Federal and state income taxes 6,733 7,201 14,160 13,959 15,638 14,976
------- ------- -------- -------- -------- --------
Total operating expenses 50,179 61,094 136,588 141,418 179,379 179,276
------- ------- -------- -------- -------- --------
OPERATING INCOME 13,495 13,326 30,180 28,750 35,663 32,956
OTHER INCOME (EXPENSE):
Allowance for equity funds used during construction 119 326 796 547 1,206 584
Other, net (214) (139) (711) (616) (1,726) (1,223)
Income taxes applicable to other income 85 62 277 242 1,152 785
------- ------- -------- -------- -------- --------
INCOME BEFORE INTEREST CHARGES 13,485 13,575 30,542 28,923 36,295 33,102
------- ------- -------- -------- -------- --------
INTEREST CHARGES:
Interest on long-term debt 3,139 2,926 9,425 7,593 12,528 9,993
Allowance for debt funds used during construction (99) (238) (974) (399) (1,274) (439)
Amortization of debt discount, premium and expense, net 137 138 412 396 551 529
Other interest charges 180 60 440 464 556 577
------- ------- -------- -------- -------- --------
Net interest charges 3,357 2,886 9,303 8,054 12,361 10,660
------- ------- -------- -------- -------- --------
NET INCOME 10,128 10,689 21,239 20,869 23,934 22,442
DIVIDENDS ON PREFERRED STOCK 581 475 1,743 1,425 2,424 1,900
------- ------- -------- -------- -------- --------
NET INCOME AFTER DIVIDENDS ON
PREFERRED STOCK $ 9,547 $10,214 $ 19,496 $ 19,444 $ 21,510 $ 20,542
======= ======= ======== ======== ======== ========
</TABLE>
( ) Denotes red figure.
The accompanying notes as they relate to SAVANNAH are an integral part of these
condensed statements.
62
<PAGE> 63
SAVANNAH ELECTRIC AND POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Stated in Thousands of Dollars)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
-------------------
1994 1993
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 21,239 $ 20,869
Adjustments to reconcile net income to net cash provided by operating activities--
Depreciation and amortization 14,372 13,490
Deferred taxes, net 1,577 1,318
Allowance for equity funds used during construction (796) (547)
Other, net 932 707
Changes in certain current assets and liabilities--
Receivables, net 9,900 (10,102)
Inventories 942 (202)
Payables (19,522) 3,742
Taxes accrued 6,204 4,998
Other (2,026) 2,135
-------- --------
Net Cash Provided From Operating Activities 32,822 36,408
-------- --------
INVESTING ACTIVITIES:
Gross property additions (24,033) (44,576)
Other (1,525) (152)
-------- --------
Net Cash Used For Investing Activities (25,558) (44,728)
-------- --------
FINANCING ACTIVITIES:
Proceeds:
First mortgage bonds - 45,000
Pollution control bonds - 4,085
Other long-term debt 8,500 10,000
Retirements:
First mortgage bonds (5,065) -
Pollution control bonds - (4,085)
Other long-term debt (628) (10,619)
Notes payable, net 3,000 (7,500)
Payment of preferred stock dividends (1,548) (1,425)
Payment of common stock dividends (12,300) (15,500)
Miscellaneous (74) (778)
-------- --------
Cash Provided From (Used For) Financing Activities (8,115) 19,178
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS (851) 10,858
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,915 1,788
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,064 $ 12,646
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid (received) during the period for--
Interest (net of amount capitalized) $ 10,298 $ 8,329
Income taxes 8,543 8,025
</TABLE>
The accompanying notes as they relate to SAVANNAH are an integral part of these
condensed statements.
63
<PAGE> 64
SAVANNAH ELECTRIC AND POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
ASSETS
<TABLE>
<CAPTION>
At September 30,
1994 At December 31,
(Unaudited) 1993
---------------- ---------------
<S> <C> <C>
UTILITY PLANT:
Plant in service, at original cost $683,567 $622,521
Less accumulated provision for depreciation 263,660 251,565
-------- --------
419,907 370,956
Construction work in progress 10,766 49,797
-------- --------
Total 430,673 420,753
-------- --------
OTHER PROPERTY AND INVESTMENTS 1,791 1,793
-------- --------
CURRENT ASSETS:
Cash and cash equivalents 3,064 3,915
Receivables--
Customer accounts receivable 22,456 18,551
Other accounts and notes receivable 462 790
Affiliated companies 203 12,924
Accumulated provision for uncollectible accounts (807) (762)
Fuel cost under recovery 6,482 7,112
Fuel stock, at average cost 7,828 8,419
Materials and supplies, at average cost 9,007 9,358
Prepayments 6,510 4,849
-------- --------
Total 55,205 65,156
-------- --------
DEFERRED CHARGES:
Premium on reacquired debt, being amortized 3,419 3,792
Deferred charges related to income taxes 23,730 24,890
Miscellaneous 11,485 10,803
-------- --------
Total 38,634 39,485
-------- --------
TOTAL ASSETS $526,303 $527,187
======== ========
</TABLE>
The accompanying notes as they relate to SAVANNAH are an integral part of these
condensed statements.
64
<PAGE> 65
SAVANNAH ELECTRIC AND POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
At September 30,
1994 At December 31,
(Unaudited) 1993
---------------- ---------------
<S> <C> <C>
CAPITALIZATION:
Common stock equity--
Common stock ($5 par value)-- authorized 16,000,000 shares;
outstanding 10,844,635 shares $ 54,223 $ 54,223
Paid-in capital 8,688 8,688
Additional minimum liability for under-funded pension obligations (2,121) (2,121)
Retained earnings 100,592 93,479
-------- --------
161,382 154,269
Preferred stock 35,000 35,000
Long-term debt 156,583 151,338
-------- --------
Total 352,965 340,607
-------- --------
CURRENT LIABILITIES:
Long-term debt due within one year 2,099 4,499
Notes payable 6,000 3,000
Accounts payable--
Affiliated companies 4,896 6,041
Other 3,872 24,401
Customer deposits 4,721 4,714
Taxes accrued--
Federal and state income 4,104 342
Other 3,629 1,187
Interest accrued 5,157 6,730
Vacation pay accrued 1,685 1,638
Work force reduction costs accrued 3,891 3,926
Miscellaneous 3,271 4,777
-------- --------
Total 43,325 61,255
-------- --------
DEFERRED CREDITS:
Accumulated deferred income taxes 69,599 66,947
Accumulated deferred investment tax credits 14,803 15,301
Deferred credits related to income taxes 25,363 26,173
Deferred compensation plans 6,636 6,117
Deferred under-funded accrued benefit obligation 5,870 5,855
Miscellaneous 7,742 4,932
-------- --------
Total 130,013 125,325
-------- --------
TOTAL CAPITALIZATION AND LIABILITIES $526,303 $527,187
======== ========
</TABLE>
The accompanying notes as they relate to SAVANNAH are an integral part of these
condensed statements.
65
<PAGE> 66
SAVANNAH ELECTRIC AND POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
EARNINGS
SAVANNAH's net income after dividends on preferred stock for the third quarter
of 1994 decreased to $9.5 million, compared to $10.2 million in the
corresponding period of 1993. The decrease in net income was primarily due to
lower revenues and an increase in other operation expense and higher
depreciation charges.
REVENUES
Revenues for the third quarter of 1994 decreased, compared to the corresponding
period in 1993, because total energy sales dropped 8.2%. Energy sales to
retail customers decreased 7.6% due to weather influences. The summer of 1993
was exceptionally hot, compared to the generally typical temperatures this past
summer. Wholesale energy sales to non-affiliated companies decreased, however,
only the capacity revenues of such sales have any measurable effect on
earnings. Capacity revenues fell $140,000.
EXPENSES
Fuel expenses during the third quarter of 1994 decreased, compared to those
recorded in the third quarter of 1993, because of a 44.0% drop in generation,
reflecting lower demand and greater use of energy from affiliates, and less
generation from more expensive oil- and gas-fired generating units. Purchased
power transactions (both sales and purchases) among the 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 operation expenses increased because, in response to updated actuarial
estimates reflecting SAVANNAH's work force reductions program (see Note (M) to
the Condensed Financial Statements herein), SAVANNAH recognized additional
pension and other postretirement benefit costs and SAVANNAH also recorded
higher damage claims. Depreciation and amortization increased because of
additions to utility plant, principally two combustion turbine peaking units.
The increases in interest on long-term debt and dividends on preferred
stock reflect the sale by SAVANNAH in 1993 of $45 million of first mortgage
bonds and $35 million of preferred stock.
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION
AFUDC represents the cost of capital charged to utility plant under
construction and is included in rate base. The equity portion of AFUDC
represents non-cash income. In addition, when facilities are completed and
included in rate base, previously capitalized amounts increase cash flow
because revenues are higher as a result of the increased rate base and
additional depreciation expense. The amount of AFUDC recorded has fallen
because the largest component of SAVANNAH's construction program, two
80-megawatt combustion turbine peaking units, were placed in service in April
and May 1994.
66
<PAGE> 67
SAVANNAH ELECTRIC AND POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS (Continued)
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 regulatory matters to growth in energy sales.
Compliance costs related to the Clean Air Act will reduce earnings if such
increased costs cannot be offset. The Clean Air Act is discussed under
"Capital Requirements for Construction" in Item 7 - Management's Discussion and
Analysis in SAVANNAH's 1993 Annual Report on Form 10-K.
Future earnings in the near term will also depend upon growth in electric
sales which are subject to a number of factors. Traditionally, these factors
have included changes in contracts with neighboring utilities, energy
conservation practiced by customers, the elasticity of demand, weather,
competition, and the rate of economic growth in SAVANNAH's service area. The
enactment of the Energy Act will have a profound effect on the future of the
electric utility industry. A discussion of the potential impact of the Energy
Act and particularly its effect on competition is found under "Future Earnings
Potential" in Item 7 - Management's Discussion and Analysis in SAVANNAH's 1993
Annual Report on Form 10-K.
FINANCIAL CONDITION
OVERVIEW
During the first nine months of 1994, SAVANNAH made gross property additions to
utility plant of $24.0 million. The funds for these additions and other
capital requirements came from an increase in short-term and long-term debt and
from operating activities, principally from earnings and noncash charges to
income such as depreciation. See the Condensed Statements of Cash Flows for
further details.
CAPITAL REQUIREMENTS FOR CONSTRUCTION
SAVANNAH's construction program is budgeted at $98 million for the three years
1994 through 1996 ($33 million in 1994, $32 million in 1995 and $33 million in
1996). Actual construction costs may vary from this estimate because of such
factors as changes in environmental regulations; the cost and efficiency of
construction labor, equipment and materials; revised load projections and the
cost of capital. The largest project during this period is the addition of two
80-megawatt combustion turbine units, which were placed in service in April and
May 1994.
Changes in environmental regulations could substantially increase the
Southern electric system's capital requirements and operating costs. The acid
rain compliance provision of the Clean Air Act will have a significant impact
on the Southern electric system. This legislation, as well as other
legislation and regulations, are described under "Environmental Matters" in
Item 7 - Management's Discussion and Analysis in SAVANNAH's 1993 Annual Report
on Form 10-K. The full impact of these
67
<PAGE> 68
SAVANNAH ELECTRIC AND POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FINANCIAL CONDITION (Continued)
requirements cannot be determined at this time, pending the development and
implementation of applicable regulations. There can be no assurance that
compliance costs will be recovered through corresponding increases in rates.
SOURCES OF CAPITAL
At September 30, 1994, SAVANNAH had $3.1 million in cash and cash equivalents
and $26 million of unused credit arrangements with banks to meet its short-term
cash needs. SAVANNAH had $6 million of short-term debt outstanding at
quarter-end. SAVANNAH has received the authority from the SEC to have
outstanding at any one time an amount of up to $70 million in short-term
borrowings.
It is anticipated that the funds required for construction and other
purposes, including compliance with environmental regulations, will be derived
from operations and the sale of additional first mortgage bonds and preferred
stock and capital contributions from SOUTHERN. SAVANNAH is required to meet
certain coverage requirements specified in its mortgage indenture and corporate
charter to issue new first mortgage bonds and preferred stock. SAVANNAH's
coverage ratios are sufficiently high to permit, at present interest rate
levels, any foreseeable security sales. The amount of securities which
SAVANNAH will be permitted to issue in the future will depend upon market
conditions and other factors prevailing at that time.
68
<PAGE> 69
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
<TABLE>
<S> <C>
REGISTRANT APPLICABLE NOTES
SOUTHERN A, B, C, D, E, F, G, H, I, J, K, L, M, N
ALABAMA B, C, D, E, M, N
GEORGIA B, C, D, F, G, H, I, J, K, M
GULF B, L, M
MISSISSIPPI B, M
SAVANNAH M
</TABLE>
69
<PAGE> 70
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 CONDENSED FINANCIAL STATEMENTS:
(A) Reference is made to Item 3 - LEGAL PROCEEDINGS in the SOUTHERN system's
combined Annual Report on Form 10-K for the year ended December 31, 1993
for a description of the proceedings related to a derivative action filed
against certain current and former directors and officers of SOUTHERN. In
April 1994, the Court of Appeals reversed the dismissal and remanded the
case to the trial court, finding that allegations by the plaintiffs
created a reasonable doubt that the board validly exercised its business
judgment in refusing the earlier demand.
(B) Reference is made to Note 3 to the financial statements of SOUTHERN,
ALABAMA, GEORGIA, GULF and MISSISSIPPI in Item 8 of the SOUTHERN system's
combined 1993 Annual Report on Form 10-K for information concerning a
proceeding initiated by the FERC regarding the reasonableness of the
Southern electric system's wholesale rate schedules and contracts that
have a return on common equity of 13.75 percent or greater. The refund
period under that proceeding ended in October 1992. In August 1994, the
FERC instituted a second such proceeding involving substantially the same
issues. A new period for potential refunds commenced under this
proceeding in October 1994, and will continue until January 1996, unless
the proceeding is terminated prior to such time.
(C) For information regarding the expected costs of decommissioning nuclear
facilities reference is made to Note (C) to the Condensed Financial
Statements in the SOUTHERN system's combined Quarterly Report on Form 10-Q
for March 31, 1994.
(D) For information regarding nuclear insurance reference is made to Notes 13,
11 and 4 to the financial statements of SOUTHERN, ALABAMA and GEORGIA,
respectively, in Item 8 in the SOUTHERN system's combined 1993 Annual
Report on Form 10-K and Note (D) to the Condensed Financial Statements in
the SOUTHERN system's combined Quarterly Report on Form 10-Q for March 31,
1994. During the second quarter of 1994, the by-laws of Nuclear Mutual
Limited were amended whereby a member cannot receive a refund in the event
insurance coverage is terminated.
(E) Reference is made to Note 3 to the financial statements of SOUTHERN and
ALABAMA in Item 8 of the SOUTHERN system's combined 1993 Annual Report on
Form 10-K for information with respect to a civil complaint filed
regarding ALABAMA's financing of heat pumps and other merchandise.
(F) Pursuant to orders from the Georgia PSC, GEORGIA deferred financing and
depreciation costs under phase-in plans for Plant Vogtle units 1 and 2
until the allowed investment was fully reflected in rates as of October
1991. In addition, the Georgia PSC issued two separate accounting
70
<PAGE> 71
NOTES TO CONDENSED FINANCIAL STATEMENTS: (Continued)
orders that required GEORGIA to defer substantially all operating and
financing costs related to both units until rate orders addressed these
costs. The Georgia PSC orders provide for recovery of deferred costs
within 10 years. The Georgia PSC also ordered GEORGIA to levelize
declining capacity buyback expense from the co-owners of the plant over a
six-year period beginning October 1991. The unamortized balance of these
deferred costs at September 30, 1994, was $456 million.
(G) Reference is made to Note 4 to the financial statements of SOUTHERN and
GEORGIA in Item 8 of the SOUTHERN system's combined 1993 Annual Report on
Form 10-K for information concerning the uncertainty related to the
actions of regulatory authorities with respect to the recovery of costs of
the Rocky Mountain pumped storage hydroelectric project. With respect to
the possible sale of GEORGIA's remaining interest in the Rocky Mountain
project, as disclosed in the 1993 Form 10-K, such preliminary discussions
have ceased and GEORGIA currently plans to retain its interest in the
project. The ultimate outcome of this matter cannot be determined at this
time.
(H) In October 1993, a Superior Court of Fulton County, Georgia, judge ruled
that rate riders previously approved by the Georgia PSC for recovery of
GEORGIA's costs incurred in connection with demand-side conservation
programs were unlawful. The judge held that the Georgia PSC lacked
statutory authority to approve such rate riders except through general
rate case proceedings and that those procedures had not been followed.
GEORGIA suspended collection of the demand-side conservation costs and
appealed to the Georgia Court of Appeals, which reversed the court's
decision as described below. In December 1993, the Georgia PSC approved
GEORGIA's request for an accounting order allowing GEORGIA to defer all
current unrecovered and future costs related to these programs until the
legal issues are resolved or until the next general rate case proceeding.
An association of industrial customers has filed a petition for review of
such accounting order in the Superior Court of Fulton County, Georgia.
GEORGIA's costs related to these conservation programs through September
1994 were $104 million of which $15 million has been collected and the
remainder deferred. The estimated costs are $11 million for the remainder
of 1994 and $43 million in 1995.
In July 1994, the Georgia Court of Appeals, reversing the superior
court decision discussed above, ruled that the Georgia PSC could lawfully
provide for recovery of demand-side conservation program costs through
rate riders. The opposing parties have filed appeals to the Georgia
Supreme Court. GEORGIA is continuing to defer program costs pending final
resolution of this matter.
The final outcome of this matter cannot now be determined; however, in
management's opinion, the final outcome will not have a material adverse
effect on SOUTHERN's or GEORGIA's Condensed Financial Statements.
(I) In June 1994, a tax deficiency notice was received from the IRS for the
years 1984 through 1987 in regards to the tax accounting by GEORGIA for a
1984 property transaction. The potential tax deficiency arising from this
issue would amount to approximately $30 million of tax plus an
71
<PAGE> 72
NOTES TO CONDENSED FINANCIAL STATEMENTS: (Continued)
additional $33 million of interest. The tax deficiency relates to a
timing issue as to when taxes are paid, therefore only the interest
portion could impact future income. Management believes that the IRS
position is incorrect and has filed a petition with the United States Tax
Court to appeal the IRS position. In September 1994, GEORGIA deposited
$46 million with the IRS to prevent additional interest charges should
GEORGIA's position on this issue not prevail. The final outcome of this
matter cannot now be determined; however, in management's opinion, the
final outcome will not have a material adverse effect on SOUTHERN's or
GEORGIA's Condensed Financial Statements.
(J) In July 1994, OPC and MEAG filed a joint complaint with the FERC seeking
to recover from GEORGIA an aggregate of approximately $16.5 million in
alleged partial requirements rates overcharges, plus approximately $6.3
million in interest. OPC and MEAG claimed that GEORGIA improperly
reflected in such rates costs associated with capacity that had previously
been sold to Gulf States pursuant to a unit power sales contract or,
alternatively, that they should be allocated a portion of the proceeds
received by GEORGIA as the result of a settlement with Gulf States of
litigation arising out of such contract. (For information concerning the
Gulf States settlement, see Note 8 and Note 3, respectively, to the
financial statements of SOUTHERN and GEORGIA in Item 8 of the SOUTHERN
system's combined 1993 Annual Report on Form 10-K.) GEORGIA's response
sought dismissal of the complaint by FERC, which dismissal was ordered on
November 9, 1994. In August 1994, OPC and MEAG also filed a complaint in
the Superior Court of Fulton County, Georgia, urging substantially the
same claims and asking the court to hear the matter in the event the FERC
declines jurisdiction. Such court proceeding was subsequently stayed
pending resolution of the FERC filing. While the outcome of this matter
cannot be determined, in management's opinion it will not have a material
adverse effect on SOUTHERN's or GEORGIA's financial condition.
(K) In compliance with the recently enacted Georgia Hazardous Site Response
Act, the State of Georgia was required to compile an inventory of all
known or suspected sites where hazardous wastes, constituents or
substances have been disposed of or released in quantities deemed
reportable by the State. In developing this list, the State of Georgia
identified several hundred properties throughout the State, including 24
sites which may require environmental remediation by GEORGIA. The
majority of these sites are electrical power substations and power
generation facilities. GEORGIA has recognized $4 million in expenses for
the anticipated clean-up cost for two sites that GEORGIA plans to
remediate. GEORGIA will conduct studies at each of the remaining sites to
determine the extent of remediation and associated clean-up costs, if any,
that may be required. GEORGIA has recognized $3 million in expenses for
the anticipated cost of completing such studies. Any cost of remediating
the remaining sites cannot presently be determined until such studies are
completed for each site, and the State of Georgia determines whether
remediation is required. If all sites were required to be remediated,
GEORGIA could incur expenses of up to $23 million in additional clean-up
costs, and construction expenditures of up to $100 million to develop new
waste management facilities or install additional pollution control
devices. The final outcome of this matter cannot now be determined;
however, in management's opinion the final outcome will not have a
material adverse effect on SOUTHERN's or GEORGIA's Condensed Financial
Statements.
72
<PAGE> 73
NOTES TO CONDENSED FINANCIAL STATEMENTS: (Continued)
(L) In August 1993, a complaint against GULF and SCS was filed in federal
district court in Ohio by two companies with which GULF had contracted for
the transportation by barge of certain of GULF's coal supplies. The
complaint alleged breach of the contract by GULF and sought damages
estimated by the plaintiffs to be in excess of $85 million. In August
1994, such complaint was dismissed with prejudice by the court in
connection with the execution by the parties of a mutually acceptable
amendment to the transportation agreement, and this matter is now
concluded.
(M) During 1994, GEORGIA and SCS, the system service company, instituted work
force reduction programs. The costs related to these programs amounted to
approximately $82.1 million for GEORGIA and $17.0 million for SCS. The
costs of the SCS work force reduction program were apportioned among the
various entities that together form the Southern electric system.
MISSISSIPPI instituted an early retirement incentive program in April 1994
and deferred the related costs of approximately $12.9 million.
MISSISSIPPI has received authority from the Mississippi PSC to defer these
costs, as well as its portion of the costs of a similar SCS program, and
to amortize over a period not to exceed 60 months, beginning no later than
January 1995. Additionally, SAVANNAH instituted a work force reduction
program in late 1993 and incurred related charges of approximately $4.5
million.
(N) In September 1994, in response to a request by ALABAMA, the Alabama PSC
issued an order allowing ALABAMA to establish a Natural Disaster Reserve
in an amount not to exceed $32 million. Additionally, the order permits
ALABAMA to change the estimating procedure for unbilled kilowatt-hours and
associated revenues. This change in estimate resulted in an increase in
unbilled revenues of approximately $28 million which offset the initial
accrual for the Natural Disaster Reserve for the same amount. ALABAMA
will accrue an additional $250,000 monthly until the reserve maximum is
attained. ALABAMA further requested and was so ordered to forego any
increase under Rate RSE (see Note 3 to the financial statements in Item 8
of ALABAMA's 1993 Annual Report on Form 10-K) through the July 1995 test.
73
<PAGE> 74
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
(1) Reference is made to the Notes to Condensed Financial
Statements herein for information regarding certain legal
and administrative proceedings in which SOUTHERN and its
reporting subsidiaries are involved.
(2) In May 1994, GEORGIA received a notice of violation from the
NRC proposing a civil penalty in the amount of $200,000
based upon allegedly inaccurate and incomplete information
relating to Plant Vogtle reported to the NRC in 1990. The
NRC also issued demands for information regarding alleged
performance failures by six individual employees to enable
the NRC to determine whether additional enforcement actions
are necessary.
In its responses to the notice of violation, submitted
to the NRC in August 1994, GEORGIA denied certain of the
NRC's allegations and admitted others. GEORGIA further
requested reconsideration of the level of the proposed civil
penalty. GEORGIA has also furnished various information to
the NRC in response to the demands described above.
Item 4. Submission of Matters to a Vote of Security Holders.
ALABAMA
ALABAMA held a special meeting of stockholders on September
21, 1994, and the following proposals were voted upon:
(1) A proposal to increase on a permanent basis the permissible
amount of securities representing unsecured short-term debt
from the existing 10% charter limitation to a 20%
restriction on all securities representing unsecured debt
was approved. The vote tabulation was as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CLASS OF STOCK FOR AGAINST ABSTAINED
-------------- --- ------- ---------
Common Stock 5,608,955 - -
Preferred Stock and
Class A Preferred Stock* 3,080,536 234,506 162,119
</TABLE>
(2) Because of the passage of the above proposal, a proposal
to increase until October 1, 2004, the permissible amount of
securities representing short-term debt from 10% charter
limitation to a 20% restriction was rendered moot.
*For the purpose of tallying shares pursuant to ALABAMA s
Charter, each share of Preferred Stock and Class A Preferred
Stock had one vote per $100 stated value.
74
<PAGE> 75
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit 24 - Powers of Attorney and resolutions.
(Designated in the SOUTHERN system's combined Form 10-K for
the year ended December 31, 1993, 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.)
Exhibit 27 - Financial Data Schedules
(a) SOUTHERN
(b) ALABAMA
(c) GEORGIA
(d) GULF
(e) MISSISSIPPI
(f) SAVANNAH
(b) Reports on Form 8-K.
There were no Reports on Form 8-K filed during the third
quarter of 1994.
75
<PAGE> 76
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 Edward L. Addison
Chairman
(Principal Executive Officer)
By W. L. Westbrook
Financial Vice President
(Principal Financial and Accounting Officer)
By /s/ Wayne Boston
--------------------------------
(Wayne Boston, Attorney-in-fact)
Date: November 10, 1994
- --------------------------------------------------------------------------------
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
By William B. Hutchins, III
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
By /s/ Wayne Boston
--------------------------------
(Wayne Boston, Attorney-in-fact)
Date: November 10, 1994
76
<PAGE> 77
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The signature of the undersigned
company shall be deemed to relate only to matters having reference to such
company and any subsidiaries thereof.
GEORGIA POWER COMPANY
By H. Allen Franklin
President and Chief Executive Officer
(Principal Executive Officer)
By Warren Y. Jobe
Executive Vice President, Treasurer and Chief Financial Officer
(Principal Financial Officer)
By /s/ Wayne Boston
---------------------------------
(Wayne Boston, Attorney-in-fact)
Date: November 10, 1994
- --------------------------------------------------------------------------------
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
By A. E. Scarbrough
Vice President - Finance
(Principal Financial and Accounting Officer)
By /s/ Wayne Boston
---------------------------------
(Wayne Boston, Attorney-in-fact)
Date: November 10, 1994
77
<PAGE> 78
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 David M. Ratcliffe
President and Chief Executive Officer
By Thomas A. Fanning
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
By /s/ Wayne Boston
--------------------------------
(Wayne Boston, Attorney-in-fact)
Date: November 10, 1994
- --------------------------------------------------------------------------------
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 Arthur M. Gignilliat, Jr.
President
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: November 10, 1994
78
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-Q FOR SEPTEMBER 30, 1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000092122
<NAME> THE SOUTHERN COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1993
<PERIOD-END> SEP-30-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 20,174,795
<OTHER-PROPERTY-AND-INVEST> 779,772
<TOTAL-CURRENT-ASSETS> 2,520,481
<TOTAL-DEFERRED-CHARGES> 2,794,693
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 26,269,741
<COMMON> 3,264,599
<CAPITAL-SURPLUS-PAID-IN> 1,657,776
<RETAINED-EARNINGS> 3,207,850
<TOTAL-COMMON-STOCKHOLDERS-EQ> 8,130,225
1,000
1,332,203
<LONG-TERM-DEBT-NET> 6,961,201
<SHORT-TERM-NOTES> 335,070
<LONG-TERM-NOTES-PAYABLE> 490,955
<COMMERCIAL-PAPER-OBLIGATIONS> 239,136
<LONG-TERM-DEBT-CURRENT-PORT> (453,134)
(1,000)
<CAPITAL-LEASE-OBLIGATIONS> 244,030
<LEASES-CURRENT> (97,276)
<OTHER-ITEMS-CAPITAL-AND-LIAB> 8,535,921
<TOT-CAPITALIZATION-AND-LIAB> 26,269,741
<GROSS-OPERATING-REVENUE> 6,382,250
<INCOME-TAX-EXPENSE> 589,201
<OTHER-OPERATING-EXPENSES> 4,416,190
<TOTAL-OPERATING-EXPENSES> 5,005,391
<OPERATING-INCOME-LOSS> 1,376,859
<OTHER-INCOME-NET> 4,309
<INCOME-BEFORE-INTEREST-EXPEN> 1,381,168
<TOTAL-INTEREST-EXPENSE> 502,318
<NET-INCOME> 878,850
65,096
<EARNINGS-AVAILABLE-FOR-COMM> 813,754
<COMMON-STOCK-DIVIDENDS> 573,999
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 1,712,292
<EPS-PRIMARY> 1.25
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FROM
10-Q FOR SEPTEMBER 30, 1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000003153
<NAME> ALABAMA POWER COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1993
<PERIOD-END> SEP-30-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 6,759,628
<OTHER-PROPERTY-AND-INVEST> 106,118
<TOTAL-CURRENT-ASSETS> 936,243
<TOTAL-DEFERRED-CHARGES> 664,833
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 8,466,822
<COMMON> 224,358
<CAPITAL-SURPLUS-PAID-IN> 1,304,791
<RETAINED-EARNINGS> 1,108,522
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,637,671
0
440,400
<LONG-TERM-DEBT-NET> 2,397,074
<SHORT-TERM-NOTES> 25,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 96,516
<LONG-TERM-DEBT-CURRENT-PORT> (101,650)
0
<CAPITAL-LEASE-OBLIGATIONS> 105,021
<LEASES-CURRENT> (95,834)
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,765,140
<TOT-CAPITALIZATION-AND-LIAB> 8,466,822
<GROSS-OPERATING-REVENUE> 2,285,173
<INCOME-TAX-EXPENSE> 193,518
<OTHER-OPERATING-EXPENSES> 1,600,600
<TOTAL-OPERATING-EXPENSES> 1,794,118
<OPERATING-INCOME-LOSS> 491,055
<OTHER-INCOME-NET> (1,616)
<INCOME-BEFORE-INTEREST-EXPEN> 489,439
<TOTAL-INTEREST-EXPENSE> 158,038
<NET-INCOME> 331,401
19,488
<EARNINGS-AVAILABLE-FOR-COMM> 311,913
<COMMON-STOCK-DIVIDENDS> 200,400
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 526,384
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FROM
10-Q FOR SEPTEMBER 30, 1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000041091
<NAME> GEORGIA POWER COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1993
<PERIOD-END> SEP-30-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 10,591,268
<OTHER-PROPERTY-AND-INVEST> 163,486
<TOTAL-CURRENT-ASSETS> 1,167,177
<TOTAL-DEFERRED-CHARGES> 1,823,616
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 13,745,547
<COMMON> 344,250
<CAPITAL-SURPLUS-PAID-IN> 2,384,761
<RETAINED-EARNINGS> 1,425,541
<TOTAL-COMMON-STOCKHOLDERS-EQ> 4,154,552
0
692,787
<LONG-TERM-DEBT-NET> 3,778,134
<SHORT-TERM-NOTES> 240,655
<LONG-TERM-NOTES-PAYABLE> 47,050
<COMMERCIAL-PAPER-OBLIGATIONS> 142,620
<LONG-TERM-DEBT-CURRENT-PORT> (252,230)
0
<CAPITAL-LEASE-OBLIGATIONS> 87,764
<LEASES-CURRENT> (304)
<OTHER-ITEMS-CAPITAL-AND-LIAB> 4,601,985
<TOT-CAPITALIZATION-AND-LIAB> 13,745,547
<GROSS-OPERATING-REVENUE> 3,235,434
<INCOME-TAX-EXPENSE> 325,586
<OTHER-OPERATING-EXPENSES> 2,195,105
<TOTAL-OPERATING-EXPENSES> 2,520,691
<OPERATING-INCOME-LOSS> 714,743
<OTHER-INCOME-NET> 22,454
<INCOME-BEFORE-INTEREST-EXPEN> 737,197
<TOTAL-INTEREST-EXPENSE> 271,181
<NET-INCOME> 466,016
35,773
<EARNINGS-AVAILABLE-FOR-COMM> 430,243
<COMMON-STOCK-DIVIDENDS> 321,000<F1>
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 934,046
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>CANCEL FOOTNOTE
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-Q FOR SEPTEMBER 30, 1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000044545
<NAME> GULF POWER COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1993
<PERIOD-END> SEP-30-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,056,440
<OTHER-PROPERTY-AND-INVEST> 8,147
<TOTAL-CURRENT-ASSETS> 184,928
<TOTAL-DEFERRED-CHARGES> 98,492
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,348,034
<COMMON> 38,060
<CAPITAL-SURPLUS-PAID-IN> 218,363
<RETAINED-EARNINGS> 165,656
<TOTAL-COMMON-STOCKHOLDERS-EQ> 422,079
1,000
89,602
<LONG-TERM-DEBT-NET> 361,087
<SHORT-TERM-NOTES> 27,500
<LONG-TERM-NOTES-PAYABLE> 54,678
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> (55,443)
(1,000)
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 392,088
<TOT-CAPITALIZATION-AND-LIAB> 1,348,034
<GROSS-OPERATING-REVENUE> 447,000
<INCOME-TAX-EXPENSE> 25,491
<OTHER-OPERATING-EXPENSES> 351,275
<TOTAL-OPERATING-EXPENSES> 376,766
<OPERATING-INCOME-LOSS> 70,234
<OTHER-INCOME-NET> 795
<INCOME-BEFORE-INTEREST-EXPEN> 71,029
<TOTAL-INTEREST-EXPENSE> 25,777
<NET-INCOME> 45,252
4,418
<EARNINGS-AVAILABLE-FOR-COMM> 40,834
<COMMON-STOCK-DIVIDENDS> 32,900
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 117,116
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FORM THE FORM
10-Q FOR SEPTEMBER 30, 1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000066904
<NAME> MISSISSIPPI POWER COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1993
<PERIOD-END> SEP-30-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 939,100
<OTHER-PROPERTY-AND-INVEST> 6,367
<TOTAL-CURRENT-ASSETS> 102,200
<TOTAL-DEFERRED-CHARGES> 75,097
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,122,764
<COMMON> 37,691
<CAPITAL-SURPLUS-PAID-IN> 179,734
<RETAINED-EARNINGS> 148,104
<TOTAL-COMMON-STOCKHOLDERS-EQ> 365,529
0
74,414
<LONG-TERM-DEBT-NET> 252,217
<SHORT-TERM-NOTES> 25,000
<LONG-TERM-NOTES-PAYABLE> 62,879
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> (41,077)
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 342,725
<TOT-CAPITALIZATION-AND-LIAB> 1,122,764
<GROSS-OPERATING-REVENUE> 388,266
<INCOME-TAX-EXPENSE> 26,929
<OTHER-OPERATING-EXPENSES> 302,324
<TOTAL-OPERATING-EXPENSES> 329,253
<OPERATING-INCOME-LOSS> 59,013
<OTHER-INCOME-NET> 3,273
<INCOME-BEFORE-INTEREST-EXPEN> 62,286
<TOTAL-INTEREST-EXPENSE> 15,245
<NET-INCOME> 47,041
3,674
<EARNINGS-AVAILABLE-FOR-COMM> 43,367
<COMMON-STOCK-DIVIDENDS> 25,500
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 71,736
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-Q FOR SEPTEMBER 30, 1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000086940
<NAME> SAVANNAH ELECTRIC AND POWER COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1993
<PERIOD-END> SEP-30-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 430,673
<OTHER-PROPERTY-AND-INVEST> 1,791
<TOTAL-CURRENT-ASSETS> 55,205
<TOTAL-DEFERRED-CHARGES> 38,634
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 526,303
<COMMON> 54,223
<CAPITAL-SURPLUS-PAID-IN> 8,688
<RETAINED-EARNINGS> 98,471
<TOTAL-COMMON-STOCKHOLDERS-EQ> 161,382
0
35,000
<LONG-TERM-DEBT-NET> 148,499
<SHORT-TERM-NOTES> 6,000
<LONG-TERM-NOTES-PAYABLE> 8,500
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> (1,350)
0
<CAPITAL-LEASE-OBLIGATIONS> 1,683
<LEASES-CURRENT> (749)
<OTHER-ITEMS-CAPITAL-AND-LIAB> 165,239
<TOT-CAPITALIZATION-AND-LIAB> 526,303
<GROSS-OPERATING-REVENUE> 166,768
<INCOME-TAX-EXPENSE> 14,160
<OTHER-OPERATING-EXPENSES> 122,428
<TOTAL-OPERATING-EXPENSES> 136,588
<OPERATING-INCOME-LOSS> 30,180
<OTHER-INCOME-NET> 362
<INCOME-BEFORE-INTEREST-EXPEN> 30,542
<TOTAL-INTEREST-EXPENSE> 9,303
<NET-INCOME> 21,239
1,743
<EARNINGS-AVAILABLE-FOR-COMM> 19,496
<COMMON-STOCK-DIVIDENDS> 12,300
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 32,822
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
