================================================================================
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 June 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _____to_____
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address and Telephone Number Identification No.
- ----------- ----------------------------------- ------------------
1-3526 The Southern Company 58-0690070
(A Delaware Corporation)
270 Peachtree Street, N.W.
Atlanta, Georgia 30303
(770) 393-0650
1-3164 Alabama Power Company 63-0004250
(An Alabama Corporation)
600 North 18th Street
Birmingham, Alabama 35291
(205) 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 East Bay Street
Savannah, Georgia 31401
(912) 232-7171
================================================================================
<PAGE>
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No____
Description of Shares Outstanding
Registrant Common Stock at July 31, 1996
- ---------- -------------- ------------------
The Southern Company Par Value $5 Per Share 673,651,015
Alabama Power Company Par Value $40 Per Share 5,608,955
Georgia Power Company No Par Value 7,761,500
Gulf Power Company No Par Value 992,717
Mississippi Power Company Without Par Value 1,121,000
Savannah Electric and Power Company Par Value $5 Per Share 10,844,635
This combined Form 10-Q is separately filed by The Southern Company,
Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi
Power Company and Savannah Electric and Power Company. Information contained
herein relating to any individual company is filed by such company on its own
behalf. Each company makes no representation as to information relating to the
other companies.
<PAGE>
<TABLE>
<CAPTION>
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 1996
Page
Number
------
<S> <C>
DEFINITIONS.............................................................................................. 4
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) and
Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition
The Southern Company and Subsidiary Companies
Condensed Consolidated Statements of Income.............................................. 6
Condensed Consolidated Statements of Cash Flows.......................................... 7
Condensed Consolidated Balance Sheets.................................................... 8
Management's Discussion and Analysis of Results of Operations and Financial Condition.... 10
Alabama Power Company
Condensed Statements of Income........................................................... 15
Condensed Statements of Cash Flows....................................................... 16
Condensed Balance Sheets................................................................. 17
Management's Discussion and Analysis of Results of Operations and Financial Condition.... 19
Exhibit 1 - Report of Independent Public Accountants..................................... 22
Georgia Power Company
Condensed Statements of Income........................................................... 24
Condensed Statements of Cash Flows....................................................... 25
Condensed Balance Sheets................................................................. 26
Management's Discussion and Analysis of Results of Operations and Financial Condition.... 28
Exhibit 1 - Report of Independent Public Accountants..................................... 32
Gulf Power Company
Condensed Statements of Income........................................................... 34
Condensed Statements of Cash Flows....................................................... 35
Condensed Balance Sheets................................................................. 36
Management's Discussion and Analysis of Results of Operations and Financial Condition.... 38
Mississippi Power Company
Condensed Statements of Income........................................................... 42
Condensed Statements of Cash Flows....................................................... 43
Condensed Balance Sheets................................................................. 44
Management's Discussion and Analysis of Results of Operations and Financial Condition.... 46
Savannah Electric and Power Company
Condensed Statements of Income........................................................... 50
Condensed Statements of Cash Flows....................................................... 51
Condensed Balance Sheets................................................................. 52
Management's Discussion and Analysis of Results of Operations and Financial Condition.... 54
Notes to the Condensed Financial Statements................................................. 57
PART II - OTHER INFORMATION
Item 1. Legal Proceedings............................................................................... 62
Item 2. Changes in Securities........................................................................... Inapplicable
Item 3. Defaults Upon Senior Securities................................................................. Inapplicable
Item 4. Submission of Matters to a Vote of Security Holders............................................. 62
Item 5. Other Information............................................................................... Inapplicable
Item 6. Exhibits and Reports on Form 8-K................................................................ 64
Signatures ..................................................................................... 66
</TABLE>
3
<PAGE>
DEFINITIONS
TERM MEANING
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
EWG................... Exempt wholesale generator
FASB.................. Financial Accounting Standards Board
FERC.................. Federal Energy Regulatory Commission
Form 10-K............. Combined Annual Report on Form 10-K of SOUTHERN,
ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH for
the year ended December 31, 1995
FUCO.................. Foreign utility company
GEORGIA............... Georgia Power Company
GULF.................. Gulf Power Company
MEAG.................. Municipal Electric Authority of Georgia
MISSISSIPPI........... Mississippi Power Company
OPC................... Oglethorpe Power Corporation
PEP................... Performance Evaluation Plan
PSC................... Public Service Commission
SAVANNAH.............. Savannah Electric and Power Company
SEC................... Securities and Exchange Commission
SEI................... Southern Electric International, Inc.
SOUTHERN.............. The Southern Company
SWEB.................. South Western Electricity plc (United Kingdom)
TVA................... Tennessee Valley Authority
4
<PAGE>
THE SOUTHERN COMPANY
AND SUBSIDIARY COMPANIES
5
<PAGE>
<TABLE>
<CAPTION>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Stated in Thousands of Dollars)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------- ------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
OPERATING REVENUES $ 2,538,568 $ 2,183,570 $ 4,954,186 $ 4,112,613
-------------- -------------- -------------- --------------
OPERATING EXPENSES:
Operation--
Fuel 555,323 545,766 1,057,951 995,548
Purchased power 223,163 70,551 494,660 129,089
Other 443,132 390,012 867,710 750,025
Maintenance 196,722 162,896 383,099 322,308
Depreciation and amortization 247,285 216,720 492,131 429,041
Amortization of deferred Plant Vogtle costs (Note K) 33,234 29,793 66,993 57,950
Taxes other than income taxes 152,306 121,432 320,951 244,880
Income taxes 218,877 193,451 384,828 345,444
-------------- -------------- -------------- --------------
Total operating expenses 2,070,042 1,730,621 4,068,323 3,274,285
-------------- -------------- -------------- --------------
OPERATING INCOME 468,526 452,949 885,863 838,328
OTHER INCOME:
Allowance for equity funds used during construction 184 1,885 1,044 5,004
Interest income 12,080 477 27,807 8,379
Other, net (20,033) 13,950 (12,309) 459
Income taxes applicable to other income 33,664 (6,641) 35,852 5,039
-------------- -------------- -------------- --------------
INCOME BEFORE INTEREST CHARGES 494,421 462,620 938,257 857,209
-------------- -------------- -------------- --------------
INTEREST CHARGES AND OTHER:
Interest on long-term debt 123,578 137,103 263,346 273,501
Allowance for debt funds used during construction (5,478) (5,391) (10,789) (11,239)
Interest on notes payable 42,260 14,793 64,807 28,391
Amortization of debt discount, premium and expense, net 7,965 7,822 20,940 15,941
Other interest charges 15,747 15,110 35,792 25,434
Minority interest in subsidiaries 1,382 3,416 826 6,622
Preferred dividends of subsidiary companies 21,707 22,253 43,200 44,703
-------------- -------------- -------------- --------------
Net interest charges and other, net 207,161 195,106 418,122 383,353
-------------- -------------- -------------- --------------
CONSOLIDATED NET INCOME $ 287,260 $ 267,514 $ 520,135 $ 473,856
============== ============== ============== ==============
AVERAGE NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING (Thousands) 671,757 665,670 670,931 663,532
EARNINGS PER SHARE OF COMMON STOCK $0.43 $0.40 $0.78 $0.71
CASH DIVIDENDS PAID PER SHARE
OF COMMON STOCK $0.315 $0.305 $0.63 $0.61
The accompanying notes as they relate to SOUTHERN are an integral
part of these condensed statements.
6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Stated in Thousands of Dollars)
For the Six Months
Ended June 30,
------------------
1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Consolidated net income $ 520,135 $ 473,856
Adjustments to reconcile net income to net cash provided by
operating activities--
Depreciation and amortization 603,643 536,079
Deferred income taxes and investment tax credits 9,265 29,591
Allowance for equity funds used during construction (1,044) (5,004)
Amortization of deferred Plant Vogtle costs (Note K) 66,993 57,950
Gain on asset sales (24,965) (23,228)
Other, net 45,328 54,000
Changes in certain current assets and liabilities--
Receivables, net (66,659) (17,212)
Fossil fuel stock 9,564 (13,085)
Materials and supplies 16,630 14,949
Prepayments (48,522) (53,272)
Payables (102,684) (266,880)
Customer deposits (84,412) 3,098
Other (54,107) 117,404
---------------- ------------
Net cash provided from operating activities 889,165 908,246
---------------- ------------
INVESTING ACTIVITIES:
Gross property additions (642,501) (634,641)
Sales of property 20,895 131,099
Other (97,653) 27,621
---------------- ------------
Net cash used for investing activities (719,259) (475,921)
---------------- ------------
FINANCING ACTIVITIES:
Proceeds--
Common stock 95,826 186,535
Preferred securities 97,000 -
First mortgage bonds 60,000 90,000
Pollution control bonds 84,620 198,535
Other long-term debt 644,148 107,977
Retirements--
Preferred stock - (1,000)
First mortgage bonds (284,574) (171,356)
Pollution control bonds (40,115) (198,625)
Other long-term debt (1,422,917) (109,599)
Special deposits-redemption funds (51,345) (135,933)
Notes payable, net 920,124 (11,972)
Payment of common stock dividends (422,353) (404,926)
Miscellaneous (3,155) (5,574)
---------------- ------------
Net cash used for financing activities (322,741) (455,938)
---------------- ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (152,835) (23,613)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 772,340 139,309
---------------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 619,505 $ 115,696
================ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for--
Interest (net of amount capitalized) $ 344,035 $ 305,783
Income taxes 303,355 245,202
The accompanying notes as they relate to SOUTHERN are an integral part
of these condensed statements.
7
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Stated in Thousands of Dollars)
ASSETS
At June 30,
1996 At December 31,
(Unaudited) 1995
---------------- ----------------
<S> <C> <C>
UTILITY PLANT:
Plant in service $ 32,552,367 $ 31,878,166
Less accumulated provision for depreciation 10,524,099 10,067,081
---------------- ----------------
22,028,268 21,811,085
Nuclear fuel, at amortized cost 235,031 225,386
Construction work in progress 821,973 989,808
---------------- ----------------
Total 23,085,272 23,026,279
---------------- ----------------
OTHER PROPERTY AND INVESTMENTS:
Argentine operating concession, being amortized 424,291 431,212
Goodwill 292,055 343,897
Nuclear decommissioning trusts 245,901 200,641
Miscellaneous 343,218 317,103
---------------- ----------------
Total 1,305,465 1,292,853
---------------- ----------------
CURRENT ASSETS:
Cash and cash equivalents 619,505 772,340
Special deposits 51,345 156,114
Receivables, less accumulated provisions for uncollectible accounts
of $34,847 at June 30, 1996 and $37,119 at December 31, 1995 1,432,615 1,362,912
Fossil fuel stock, at average cost 317,104 326,669
Materials and supplies, at average cost 539,544 551,546
Prepayments 327,616 265,988
Vacation pay deferred 78,285 74,135
---------------- ----------------
Total 3,366,014 3,509,704
---------------- ----------------
DEFERRED CHARGES:
Deferred charges related to income taxes 1,350,066 1,386,116
Deferred Plant Vogtle costs (Note K) 240,645 307,638
Debt expense, being amortized 65,849 68,539
Premium on reacquired debt, being amortized 283,800 294,825
Miscellaneous 643,749 636,327
---------------- ----------------
Total 2,584,109 2,693,445
---------------- ----------------
TOTAL ASSETS $ 30,340,860 $ 30,522,281
================ ================
The accompanying notes as they relate to SOUTHERN are an integral part of
these condensed statements.
8
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Stated in Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
At June 30,
1996 At December 31,
(Unaudited) 1995
---------------- ---------------
<S> <C> <C>
CAPITALIZATION:
Common stock, par value $5 per share -
Authorized -- 1 billion shares;
Outstanding -- June 30, 1996: 673,649,062 shares
-- December 31, 1995: 669,542,914 shares $ 3,368,245 $ 3,347,715
Paid-in capital 1,987,058 1,940,823
Retained earnings 3,580,409 3,483,624
---------------- ----------------
8,935,712 8,772,162
Preferred stock of subsidiaries 1,257,203 1,332,203
Subsidiary obligated mandatorily redeemable preferred securities 197,000 100,000
Long-term debt 7,478,399 8,274,012
---------------- ----------------
Total 17,868,314 18,478,377
---------------- ----------------
CURRENT LIABILITIES:
Preferred stock of subsidiaries due within one year 75,000 -
Long-term debt due within one year 187,764 508,572
Notes payable 2,589,862 1,669,738
Accounts payable 656,297 785,490
Customer deposits 132,232 216,644
Taxes accrued--
Income taxes 58,953 92,684
Other 202,592 178,807
Interest accrued 199,391 199,112
Vacation pay accrued 104,598 99,678
Miscellaneous 444,023 530,461
---------------- ----------------
Total 4,650,712 4,281,186
---------------- ----------------
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes 4,690,977 4,611,081
Deferred credits related to income taxes 908,601 935,611
Accumulated deferred investment tax credits 804,306 820,127
Minority interest in subsidiaries 223,298 230,500
Prepaid capacity revenues 127,220 131,186
Department of Energy assessments 86,113 86,113
Disallowed Plant Vogtle capacity buyback costs 57,550 58,514
Storm damage reserves 33,288 30,777
Miscellaneous 890,481 858,809
---------------- ----------------
Total 7,821,834 7,762,718
---------------- ----------------
TOTAL CAPITALIZATION AND LIABILITIES $ 30,340,860 $ 30,522,281
================ ================
The accompanying notes as they relate to SOUTHERN are an integral part of
these condensed statements.
9
</TABLE>
<PAGE>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
SECOND QUARTER 1996 vs. SECOND QUARTER 1995
AND
YEAR-TO-DATE 1996 vs. YEAR-TO-DATE 1995
RESULTS OF OPERATIONS
Earnings
SOUTHERN's consolidated net income for the second quarter and year-to-date 1996
was $287 million ($0.43 per share) and $520 million ($0.78 per share),
respectively, compared to $268 million ($0.40 per share) and $474 million ($0.71
per share) for the corresponding periods of 1995. This resulted in a
consolidated net income increase of 7.4% for the quarter and 9.8% year-to-date.
Colder-than-normal weather during the first three months of 1996 coupled with
warmer-than-usual weather during late spring and early summer increased the
demand for electricity by residential and commercial customers which positively
affected earnings of the core business. The performance of the SEI-related
portion of the business (primarily resulting from the acquisition of SWEB in the
third quarter of 1995) also contributed to the improvement in 1996 earnings.
(Reference is made to Note 14 of SOUTHERN's financial statements in Item 8 of
the Form 10-K for additional information regarding the acquisition of SWEB.
Reference is also made to "Future Earnings Potential" below relating to the
sale, in July 1996, of a 25% share of SWEB to PP&L Resources, Inc.)
SOUTHERN's core business is primarily represented by its five domestic
electric utility operating companies, which provide electric service in four
Southeastern states. Another significant portion of SOUTHERN's business is
represented by SEI, which owns and manages international and domestic businesses
for SOUTHERN. Businesses acquired by SEI have been included in the consolidated
statements of income since the date of acquisition. Certain changes in operating
revenues and expenses from the prior period are the result of such acquisitions.
Significant income statement items appropriate for discussion include the
following:
<TABLE>
<CAPTION>
Increase (Decrease)
--------------------------------------------------------------
Second Quarter Year-To-Date
------------------------------- ------------------------------
(in thousands) % (in thousands) %
<S> <C> <C> <C> <C>
Operating revenues............................... $354,998 16.3 $841,573 20.5
Purchased power expense.......................... 152,612 216.3 365,571 283.2
Maintenance expense.............................. 33,826 20.8 60,791 18.9
Depreciation and amortization expense............ 30,565 14.1 63,090 14.7
Taxes other than income taxes.................... 30,874 25.4 76,071 31.1
Interest on long-term debt....................... (13,525) (9.9) (10,155) (3.7)
Interest on notes payable........................ 27,467 185.7 36,416 128.3
</TABLE>
Operating revenues. The increase in operating revenues of the core business
was influenced most heavily by an increase in the amount of retail energy sold.
For the second quarter and year-to-date 1996, total retail kilowatt-hour sales
increased 4.7% and 6.3%, respectively, over the same periods of 1995. Retail
revenues, excluding those revenues which represent the pass-through of fuel and
certain other expenses and do not affect income, increased $58 million for the
second quarter and $127 million year-to-date 1996. Residential energy sales for
the second quarter and year-to-date 1996 increased 7.6% and 10.3%, respectively,
10
<PAGE>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
primarily due to favorable weather conditions and an increase in the number of
customers served. The same factors affected commercial energy sales for the
second quarter and year-to-date 1996, which increased 5.8% and 7.9%,
respectively. Weather was also a factor in increased wholesale energy sales,
which were up 8.6% and 17.6% compared to the corresponding periods of 1995.
However, capacity revenues from off-system sales were down $2 million for the
second quarter and $20 million year-to-date 1996 primarily due to the scheduled
decline in megawatts of capacity under long-term contracts compared to the
previous periods of 1995. For the second quarter and year-to-date 1996,
operating revenues applicable to SEI-related activities increased by $279
million and $636 million, respectively, as compared to the corresponding periods
of 1995. The primary reason for these increases relates to the acquisition of
SWEB.
Purchased power expense. The substantial increase in purchased power
expense is attributable to SEI-related activities, specifically, SWEB's
operations. (SWEB's main business is the distribution of electricity. It must
purchase essentially all of its power.) Purchased power expense in the core
business increased only 2.5% or $1 million for the second quarter and 3.5% or $4
million for year-to-date 1996.
Maintenance expense. Maintenance expense related to the core business
increased $21 million or 12.9% for the second quarter and $33 million or 10.3%
for year-to-date 1996 compared to the corresponding periods of 1995 due to the
timing of scheduled maintenance performed on generating units. SEI-related
activities accounted for the remainder.
Depreciation and amortization expense. Depreciation and amortization
expense in the core business increased $14 million or 6.9% for the second
quarter and $31 million or 7.6% for year-to-date 1996 compared to the
corresponding periods of 1995 mainly due to accelerated depreciation of
generating plants and additional plant investment.
SEI-related activities accounted for the remainder.
Taxes other than income taxes. For the second quarter and year-to-date
1996, taxes other than income taxes associated with the core business increased
$1 million or 1.1% and $11 million or 4.5%, respectively, compared to the
corresponding periods of 1995 primarily due to higher municipal and county
franchise taxes resulting from increased sales. SEI-related activities accounted
for the remainder.
Interest on long-term debt. After excluding those amounts attributable to
SEI-related business activities, interest on long-term debt in the core business
decreased $20 million (15.4%) for the second quarter and $38 million (14.7%)
year-to-date 1996 compared to the corresponding periods of 1995 reflecting the
redemption and refinancing of long-term debt by the operating companies.
Interest on notes payable. After excluding those amounts attributable to
SEI-related business activities, interest on notes payable increased $2 million
or 16.6% for the current quarter and $8 million or 29.6% year-to-date 1996
reflecting higher amounts of short-term debt outstanding.
Future Earnings Potential
The results of operations discussed above are not necessarily indicative of
future earnings potential. The level of future earnings depends on numerous
factors ranging from energy sales growth to a less regulated, more competitive
environment, with SEI and other business becoming more significant.
11
<PAGE>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
With respect to SEI-related activities, SOUTHERN received, in April 1996,
an order from the SEC which in effect allows it to use the proceeds from
financings to increase its aggregate investment in EWGs and FUCOs up to an
amount not exceeding 100% of SOUTHERN's consolidated retained earnings. At June
30, 1996, SOUTHERN's consolidated retained earnings amounted to $3,580 million,
and its aggregate investment in EWGs and FUCOs amounted to $1,275 million. For
additional information relating to SOUTHERN's SEI-related and other business
activities, see Item 1 - BUSINESS - "New Business Development" in the Form 10-K.
In addition to the discussion in the Form 10-K relating to SWEB, on July 1,
1996, SEI sold, indirectly, a 25% share in SWEB to PP&L Resources, Inc. for some
$185 million.
With the enactment of the Energy Act and new legislation being discussed at
federal and state levels to expand customer choice, the Southern electric system
is positioning the business to meet the challenge of increasing competition.
Legislation has been enacted in Alabama that would establish a process for
determining whether utilities would experience "stranded costs" upon the
transfer of an existing customer of a utility to another electric supplier. This
legislation authorizes the Alabama PSC to make a determination of whether
stranded costs would exist as a result of such a transfer by a customer of
ALABAMA and would require the customer seeking an alternative supplier to pay
any stranded costs found to exist. The legislation has termination provisions
keyed to passage of comprehensive retail electric service competition
legislation which addresses stranded costs of existing utilities and eliminates
the obligation of utilities to provide generating resources. For additional
information, see Item 1 - BUSINESS "Competition" and Item 7 - MANAGEMENT'S
DISCUSSION AND ANALYSIS - "Future Earnings Potential" of SOUTHERN in the Form
10-K.
Compliance costs related to the Clean Air Act could affect earnings if such
costs cannot be offset. For additional information about the Clean Air Act and
other environmental issues, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS
"Environmental Matters" of SOUTHERN in the Form 10-K.
Reference is made to Notes (B), (C), (E), (F), (H), (J), (K), (L), (M),
(O), (P) and (S) in the "Notes to the Condensed Financial Statements" herein for
discussion of various contingencies and other matters which may affect future
earnings potential. Reference is also made to Part II - Item 1 - "Legal
Proceedings" herein.
FINANCIAL CONDITION
Overview
The major change in SOUTHERN's financial condition during the first half of 1996
was the addition of approximately $643 million to utility plant. The funds for
these additions and other capital requirements were derived primarily from
operations and increased short-term debt. See SOUTHERN's Condensed Statements of
Cash Flows for further details.
Financing Activities
During the first half of 1996, the operating companies sold $60 million of first
mortgage bonds, and through public authorities, $85 million of pollution control
revenue bonds. Retirements, including maturities, of the operating companies'
first mortgage bonds and pollution control revenue bonds totaled $322 million. A
subsidiary of ALABAMA formed as a statutory business trust sold $97 million of
trust preferred securities guaranteed by ALABAMA and loaned the proceeds of such
securities to ALABAMA. See Note (I) to the Condensed Financial Statements herein
for further details.
12
<PAGE>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
During the first half of 1996, SOUTHERN raised $96 million from the
issuance of new common stock under SOUTHERN's various stock plans. The market
price of SOUTHERN's common stock at June 30, 1996 was $24.625 per share and the
book value was $13.26 per share, representing a market-to-book ratio of 186
percent, compared to $24.625, $13.10 and 188 percent, respectively, at the end
of 1995. The dividend for the second quarter of 1996 was 31.5 cents per share.
Capital Requirements
Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS of SOUTHERN
under "Capital Requirements for Construction," "Environmental Matters" and
"Other Capital Requirements" in the Form 10-K for a description of the Southern
electric system's capital requirements for its construction program,
environmental compliance efforts, sinking fund requirements and maturing debt.
Approximately $203 million will be required by June 30, 1997, for present
sinking fund requirements, redemption of preferred stock and maturities of
long-term debt. Also, the operating subsidiaries plan to continue, to the extent
possible, a program to retire higher-cost debt and preferred stock and replace
these securities with lower-cost capital.
Sources of Capital
In addition to the financing activities previously described, SOUTHERN may
require additional equity capital during the remainder of the year. The amounts
and timing of additional equity capital to be raised in 1996, as well as in
subsequent years, will be contingent on SOUTHERN's investment opportunities. The
operating companies plan to obtain the funds required for construction and other
purposes from sources similar to those used in the past. The amount, type and
timing of any financings--if needed--will depend upon maintenance of adequate
earnings, regulatory approval, prevailing market conditions and other factors.
Currently, each of the operating companies expects to have adequate earnings
coverage ratios for any anticipated security sales through at least 1998. See
Item 1 - BUSINESS - "Financing Programs" in the Form 10-K for additional
information.
To meet short-term cash needs and contingencies, the SOUTHERN system had at
June 30, 1996, approximately $620 million of cash and cash equivalents and
approximately $4.0 billion of unused credit arrangements with banks (including
$745 million of such arrangements under which borrowings may be made only to
fund purchase obligations of the operating companies relating to variable rate
pollution control bonds). At June 30, 1996, the system companies had outstanding
approximately $1.4 billion of short-term notes payable and $1.2 billion of
commercial paper. Since SOUTHERN's construction program with respect to major
generating projects in the core business 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.
See Note (D) to the Condensed Financial Statements herein for discussion of
financial derivative contracts entered into by SOUTHERN.
13
<PAGE>
ALABAMA POWER COMPANY
14
<PAGE>
<TABLE>
<CAPTION>
ALABAMA POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Stated in Thousands of Dollars)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------- ------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Revenues $ 727,843 $ 735,190 $ 1,383,244 $ 1,354,160
Revenues from affiliates 51,744 17,863 129,152 45,664
------------ ------------ -------------- --------------
Total operating revenues 779,587 753,053 1,512,396 1,399,824
------------ ------------ -------------- --------------
OPERATING EXPENSES:
Operation--
Fuel 211,020 196,419 422,649 353,608
Purchased power from non-affiliates 10,889 6,592 19,856 9,211
Purchased power from affiliates 24,017 29,723 39,863 52,684
Other 134,187 124,672 251,184 237,395
Maintenance 68,059 59,345 130,993 123,230
Depreciation and amortization 79,819 76,374 159,717 152,831
Taxes other than income taxes 43,673 44,031 93,737 91,709
Federal and state income taxes 56,250 58,212 100,672 98,522
------------ ------------ -------------- --------------
Total operating expenses 627,914 595,368 1,218,671 1,119,190
------------ ------------ -------------- --------------
OPERATING INCOME 151,673 157,685 293,725 280,634
OTHER INCOME (EXPENSE):
Allowance for equity funds used during construction 32 1,002 433 2,259
Income from subsidiary 967 1,037 1,941 1,875
Interest income 5,315 (3,975) 14,985 920
Other, net (14,996) (3,564) (22,619) (11,374)
Income taxes applicable to other income 14,465 3,269 14,095 7,999
------------ ------------ -------------- --------------
INCOME BEFORE INTEREST CHARGES 157,456 155,454 302,560 282,313
------------ ------------ -------------- --------------
INTEREST CHARGES:
Interest on long-term debt 42,312 45,547 84,888 90,947
Allowance for debt funds used during construction (1,846) (1,629) (3,722) (3,670)
Interest on interim obligations 5,751 4,864 11,478 8,870
Amortization of debt discount, premium and expense, net 2,272 2,525 9,644 5,044
Other interest charges 6,564 8,402 18,098 13,193
------------ ------------ -------------- --------------
Net interest charges 55,053 59,709 120,386 114,384
------------ ------------ -------------- --------------
NET INCOME 102,403 95,745 182,174 167,929
DIVIDENDS ON PREFERRED STOCK 6,625 6,819 13,237 13,675
------------ ------------ -------------- --------------
NET INCOME AFTER DIVIDENDS ON
PREFERRED STOCK $ 95,778 $ 88,926 $ 168,937 $ 154,254
============ ============ ============== ==============
The accompanying notes as they relate to ALABAMA are an integral
part of these condensed statements.
15
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALABAMA POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Stated in Thousands of Dollars)
For the Six Months
Ended June 30,
------------------
1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 182,174 $ 167,929
Adjustments to reconcile net income to net cash provided by
operating activities--
Depreciation and amortization 198,735 180,282
Deferred income taxes and investment tax credits, net (2,830) 10,745
Allowance for equity funds used during construction (433) (2,259)
Other, net 17,395 53,649
Changes in certain current assets and liabilities--
Receivables, net (27,979) (25,487)
Inventories 6,925 (5,434)
Payables (54,441) (125,287)
Taxes accrued 26,521 28,522
Energy cost recovery, retail 29,781 9,633
Other (44,510) (47,908)
---------------- ----------------
Net cash provided from operating activities 331,338 244,385
---------------- ----------------
INVESTING ACTIVITIES:
Gross property additions (221,021) (246,744)
Other (33,413) (34,490)
---------------- ----------------
Net cash used for investing activities (254,434) (281,234)
---------------- ----------------
FINANCING ACTIVITIES:
Proceeds--
Company obligated mandatorily redeemable preferred securities of Alabama
Power Capital Trust I holding Company Junior
Subordinated Notes (Note I) 97,000 -
Other long-term debt - 50,000
Retirements--
First mortgage bonds (83,797) -
Other long-term debt (481) (50,395)
Interim obligations, net 85,017 192,172
Payment of preferred stock dividends (13,261) (13,830)
Payment of common stock dividends (152,400) (141,400)
Miscellaneous (3,031) (1,506)
---------------- ----------------
Net cash provided from (used for) financing activities (70,953) 35,041
---------------- ----------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 5,951 (1,808)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 12,616 14,676
---------------- ----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 18,567 $ 12,868
================ ================
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for--
Interest (net of amount capitalized) $ 94,323 $ 93,677
Income taxes 99,855 74,013
The accompanying notes as they relate to ALABAMA are an integral part
of these condensed statements.
16
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALABAMA POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
ASSETS
At June 30,
1996 At December 31,
(Unaudited) 1995
---------------- ------------------
<S> <C> <C>
UTILITY PLANT:
Plant in service $ 10,626,224 $ 10,430,792
Less accumulated provision for depreciation 3,989,130 3,838,093
---------------- ----------------
6,637,094 6,592,699
Nuclear fuel, at amortized cost 99,418 100,537
Construction work in progress 336,663 362,768
---------------- ----------------
Total 7,073,175 7,056,004
---------------- ----------------
OTHER PROPERTY AND INVESTMENTS:
Southern Electric Generating Company, at equity 26,401 27,232
Nuclear decommissioning trusts 125,364 108,368
Miscellaneous 20,002 19,156
---------------- ----------------
Total 171,767 154,756
---------------- ----------------
CURRENT ASSETS:
Cash and cash equivalents 18,567 12,616
Receivables--
Customer accounts receivable 375,126 355,833
Other accounts and notes receivable 26,140 28,082
Affiliated companies 45,235 41,819
Accumulated provision for uncollectible accounts (1,027) (1,212)
Refundable income taxes 1,452 2,635
Fossil fuel stock, at average cost 105,706 106,627
Materials and supplies, at average cost 173,099 179,103
Prepayments 164,790 116,331
Vacation pay deferred 29,033 29,458
---------------- ----------------
Total 938,121 871,292
---------------- ----------------
DEFERRED CHARGES:
Deferred charges related to income taxes 428,658 436,837
Debt expense, being amortized 7,631 7,648
Premium on reacquired debt, being amortized 81,999 89,967
Uranium enrichment decontamination and decommissioning fund 40,282 40,282
Miscellaneous 92,579 87,574
---------------- ----------------
Total 651,149 662,308
---------------- ----------------
TOTAL ASSETS $ 8,834,212 $ 8,744,360
================ ================
The accompanying notes as they relate to ALABAMA are an integral part of
these condensed statements.
17
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALABAMA POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
At June 30,
1996 At December 31,
(Unaudited) 1995
-------------- ---------------
<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 1,177,780 1,161,225
-------------- --------------
2,706,929 2,690,374
Preferred stock 440,400 440,400
Company obligated mandatorily redeemable preferred securities of
Alabama Power Capital Trust I holding Company Junior
Subordinated Notes (Note I) 97,000 -
Long-term debt 2,373,060 2,374,948
-------------- --------------
Total 5,617,389 5,505,722
-------------- --------------
CURRENT LIABILITIES:
Long-term debt due within one year 930 84,682
Notes payable to banks 15,000 -
Commercial paper 460,033 390,016
Accounts payable--
Affiliated companies 73,588 76,326
Other 118,540 182,401
Customer deposits 31,582 30,353
Taxes accrued--
Federal and state income 5,687 13,599
Other 44,849 18,158
Interest accrued 54,002 53,527
Vacation pay accrued 29,033 29,458
Miscellaneous 89,661 70,543
-------------- --------------
Total 922,905 949,063
-------------- --------------
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes 1,204,711 1,191,591
Accumulated deferred investment tax credits 299,681 305,372
Prepaid capacity revenues, net 127,220 131,186
Uranium enrichment decontamination and decommissioning fund 36,620 36,620
Deferred credits related to income taxes 374,308 386,038
Natural disaster reserve 19,983 17,959
Miscellaneous 231,395 220,809
-------------- --------------
Total 2,293,918 2,289,575
-------------- --------------
TOTAL CAPITALIZATION AND LIABILITIES $ 8,834,212 $ 8,744,360
============== ==============
The accompanying notes as they relate to ALABAMA are an integral part of
these condensed statements.
18
</TABLE>
<PAGE>
ALABAMA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
SECOND QUARTER 1996 vs. SECOND QUARTER 1995
AND
YEAR-TO-DATE 1996 vs. YEAR-TO-DATE 1995
RESULTS OF OPERATIONS
Earnings
ALABAMA's net income after dividends on preferred stock for the second quarter
and year-to-date 1996 was $95.8 million and $168.9 million, respectively,
compared to $88.9 million and $154.3 million for the corresponding periods of
1995.
Earnings increased by 7.7% for the second quarter and by 9.5% year-to-date.
Significant income statement items appropriate for discussion include the
following:
<TABLE>
<CAPTION>
Increase (Decrease)
--------------------------------------------------------
Second Quarter Year-To-Date
-------------------------- -----------------------------
(in thousands) % (in thousands) %
<S> <C> <C> <C> <C>
Revenues............................................. $(7,347) (1.0) $29,084 2.1
Revenues from affiliates............................. 33,881 189.7 83,488 182.8
Fuel expense......................................... 14,601 7.4 69,041 19.5
Interest income...................................... 9,290 233.7 14,065 1,528.8
Other, net........................................... (11,432) (320.8) (11,245) (98.9)
Income taxes applicable to other income.............. 11,196 342.5 6,096 76.2
Interest on long-term debt........................... (3,235) (7.1) (6,059) (6.7)
</TABLE>
Revenues. Excluding fuel revenues, which represent the pass-through of fuel
expenses and do not affect net income, revenues for the second quarter 1996
increased $12.4 million and year-to-date 1996 increased $34.1 million, compared
to the corresponding periods of 1995. The increase in revenues was influenced
most heavily by an increase in the amount of retail energy sold. For
year-to-date 1996, total retail kilowatt-hour sales increased 6.3% over the same
period of 1995, and retail revenues, excluding fuel revenues, increased $36.2
million. Residential, commercial and industrial energy sales increased 10.1%,
11.4% and 1.3%, respectively. Weather and a strong economy in ALABAMA's service
territory had a positive effect on retail sales.
Revenues from affiliates. Revenues from sales to affiliated companies
within the Southern electric system, as well as purchases of energy, will vary
from period to period depending on demand, the availability, and cost of
generating resources at each company. These transactions did not have a
significant impact on earnings.
Fuel expense. The increase in fuel expense for the second quarter and
year-to-date 1996 as compared to the corresponding periods of 1995 can be
attributed to higher generation necessary to meet the increased demand for
electricity.
Interest income. Interest income was reduced in May 1995, pursuant to
litigation, as a result of a charge of $9 million to reflect the refund of
interest on the sales of merchandise by vendors other than ALABAMA. In addition,
interest income increased approximately $5 million for year-to-date 1996 as the
19
<PAGE>
ALABAMA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
result of the recognition of gains from the sales of securities from the nuclear
decommissioning trust. This increase in income was offset by a concurrent
recognition of other interest charges in accordance with FERC requirements.
Other, net. For the second quarter 1996, donations, contributions and
injuries and damages expenses were approximately $9.0 million higher than in the
corresponding period of 1995. To a lesser extent, these same factors also
contributed to the year-to-date 1996 period, in addition to a $5.6 million gain
on the disposition of property which was recognized in 1995.
Income taxes applicable to other income. In June 1996, ALABAMA donated
certain nonutility property to the Economic Development Partnership of Alabama.
This donation resulted in a reduction of income taxes applicable to other income
of approximately $10.6 million.
Interest on long-term debt. The decline in interest on long-term debt
reflects the redemption and refinancing of long-term debt over the past twelve
months.
Future Earnings Potential
The results of operations discussed above are not necessarily indicative of
future earnings potential. The level of future earnings depends on numerous
factors ranging from energy sales growth to a less regulated, more competitive
environment.
With the enactment of the Energy Act and new legislation being discussed at
federal and state levels to expand customer choice, the Southern electric system
is positioning the business to meet the challenge of increasing competition.
Legislation has been enacted in Alabama that would establish a process for
determining whether utilities would experience "stranded costs" upon the
transfer of an existing customer of a utility to another electric supplier. This
legislation authorizes the Alabama PSC to make a determination of whether
stranded costs would exist as a result of such a transfer by a customer of
ALABAMA and would require the customer seeking an alternative supplier to pay
any stranded costs found to exist. The legislation has termination provisions
keyed to passage of comprehensive retail electric service competition
legislation which addresses stranded costs of existing utilities and eliminates
the obligation of utilities to provide generating resources. For additional
information, see Item 1 - BUSINESS "Competition" and Item 7 - MANAGEMENT'S
DISCUSSION AND ANALYSIS - "Future Earnings Potential" of ALABAMA in the Form
10-K.
Compliance costs related to the Clean Air Act could affect earnings if such
costs cannot be offset. For additional information about the Clean Air Act and
other environmental issues, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS
"Environmental Matters" of ALABAMA in the Form 10-K.
Reference is made to Notes (B), (C), (F), (H) and (S) in the "Notes to the
Condensed Financial Statements" herein for discussion of various contingencies
and other matters which may affect future earnings potential. Reference is also
made to Part II - Item 1 - "Legal Proceedings" herein.
20
<PAGE>
ALABAMA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FINANCIAL CONDITION
Overview
The major change in ALABAMA's financial condition during the first half of 1996
was the addition of approximately $221.0 million to utility plant. The funds for
these additions and other capital requirements were derived primarily from
operating activities and an increase in short-term debt. See ALABAMA's Condensed
Statements of Cash Flows for further details.
Financing Activities
During the first quarter of 1996, maturities and redemptions of first mortgage
bonds of ALABAMA totaled $83.8 million. Also, Alabama Power Capital Trust I, a
statutory business trust established for the sole purpose of holding ALABAMA's
junior subordinated notes and issuing preferred securities, sold $97,000,000 of
its 7.375% trust preferred securities which are guaranteed by ALABAMA. See Note
(I) to the Condensed Financial Statements herein for further details. No
additional securities were issued, redeemed or matured during the second
quarter.
ALABAMA will continue to retire higher-cost debt and preferred stock and
replace these securities with lower-cost capital, as market conditions permit.
Capital Requirements
Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS of ALABAMA
under "Capital Requirements," "Other Capital Requirements" and "Environmental
Matters" in the Form 10-K for a description of ALABAMA's capital requirements
for its construction program, maturing debt and environmental compliance
efforts.
Sources of Capital
In addition to the financing activities previously described herein, ALABAMA
plans to obtain the funds required for construction and other purposes from
sources similar to those used in the past. The amount, type and timing of any
financings--if needed--will depend upon maintenance of adequate earnings,
regulatory approval, prevailing market conditions and other factors. Currently,
ALABAMA expects to have adequate earnings coverage ratios for any anticipated
security sales through at least 1998. See Item 1 - BUSINESS - "Financing
Programs" in the Form 10-K for additional information.
To meet short-term cash needs and contingencies, ALABAMA had at June 30,
1996, approximately $18.6 million of cash and cash equivalents and had committed
lines of credit of approximately $608 million with regulatory authority for up
to $750 million of short-term borrowing. At June 30, 1996, ALABAMA had
outstanding $15.0 million of short-term notes payable to banks and $460.0
million of commercial paper. Since ALABAMA has no major generating plants under
construction, management believes that the need for working capital can be
adequately met by utilizing lines of credit without maintaining large cash
balances.
21
<PAGE>
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 June 30, 1996, and the related condensed statements of income for
the three-month and six-month periods ended June 30, 1996 and 1995, and
condensed statements of cash flows for the six-month periods ended June 30, 1996
and 1995. 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, 1995
(not presented herein) and, in our report dated February 21, 1996, 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, 1995 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
August 8, 1996
22
<PAGE>
GEORGIA POWER COMPANY
23
<PAGE>
<TABLE>
<CAPTION>
GEORGIA POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Stated in Thousands of Dollars)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
--------------------- ------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Revenues $ 1,125,309 $ 1,053,369 $ 2,140,662 $ 2,014,416
Revenues from affiliates 8,857 21,534 22,323 34,980
-------------- -------------- -------------- --------------
Total operating revenues 1,134,166 1,074,903 2,162,985 2,049,396
-------------- -------------- -------------- --------------
OPERATING EXPENSES:
Operation--
Fuel 214,191 231,312 402,685 432,255
Purchased power from non-affiliates 40,852 47,142 77,772 88,714
Purchased power from affiliates 57,281 28,155 122,757 57,885
Provision for separation benefits 8,374 2,919 26,874 3,979
Other 195,459 176,313 361,003 337,986
Maintenance 76,777 71,218 152,603 137,187
Depreciation and amortization 107,748 99,333 215,268 195,493
Amortization of deferred Plant Vogtle costs (Note K) 33,234 29,793 66,993 57,950
Taxes other than income taxes 51,714 51,512 106,860 102,301
Federal and state income taxes 115,555 107,212 205,239 198,649
-------------- -------------- -------------- --------------
Total operating expenses 901,185 844,909 1,738,054 1,612,399
-------------- -------------- -------------- --------------
OPERATING INCOME 232,981 229,994 424,931 436,997
OTHER INCOME (EXPENSE):
Allowance for equity funds used during construction - 739 255 2,410
Equity in earnings of unconsolidated subsidiary 968 1,037 1,941 1,875
Interest income 2,013 2,388 2,914 2,669
Other, net (5,717) 23,099 (9,390) 17,365
Income taxes applicable to other income 2,388 (14,869) 2,526 (11,308)
-------------- -------------- -------------- --------------
INCOME BEFORE INTEREST CHARGES 232,633 242,388 423,177 450,008
-------------- -------------- -------------- --------------
INTEREST CHARGES:
Interest on long-term debt 52,680 68,893 106,110 137,458
Allowance for debt funds used during construction (3,301) (3,437) (6,491) (7,051)
Interest on interim obligations 6,118 6,703 11,157 12,120
Amortization of debt discount, premium and expense, net 3,625 4,096 7,472 8,016
Other interest charges 7,383 5,444 12,748 10,326
-------------- -------------- -------------- --------------
Net interest charges 66,505 81,699 130,996 160,869
-------------- -------------- -------------- --------------
NET INCOME 166,128 160,689 292,181 289,139
DIVIDENDS ON PREFERRED STOCK 11,839 12,165 23,491 24,478
-------------- -------------- -------------- --------------
NET INCOME AFTER DIVIDENDS ON
PREFERRED STOCK $ 154,289 $ 148,524 $ 268,690 $ 264,661
============== ============== ============== ==============
The accompanying notes as they relate to GEORGIA are an integral
part of these condensed statements.
24
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GEORGIA POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Stated in Thousands of Dollars)
For the Six Months
Ended June 30,
------------------
1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 292,181 $ 289,139
Adjustments to reconcile net income to net cash provided by operating
activities--
Depreciation and amortization 264,814 246,322
Deferred income taxes and investment tax credits, net 14,365 12,377
Allowance for equity funds used during construction (255) (2,410)
Amortization of deferred Plant Vogtle costs (Note K) 66,993 57,950
Gain on asset sales (2,022) (23,353)
Other, net 43,949 20,900
Changes in certain current assets and liabilities--
Receivables, net (13,207) (35,400)
Inventories 8,552 6,637
Payables (26,551) (50,636)
Taxes accrued 27,766 69,324
Energy cost recovery, retail (5,618) 23,847
Other (13,416) 20,100
-------------- --------------
Net cash provided from operating activities 657,551 634,797
-------------- --------------
INVESTING ACTIVITIES:
Gross property additions (242,457) (217,288)
Sales of property 1,800 131,099
Other (55,753) (49,451)
-------------- --------------
Net cash used for investing activities (296,410) (135,640)
-------------- --------------
FINANCING ACTIVITIES:
Proceeds--
First mortgage bonds 10,000 75,000
Pollution control bonds 51,345 148,535
Retirements--
First mortgage bonds (150,000) (140,356)
Pollution control bonds (6,840) (148,625)
Special deposits - redemption funds (51,345) (135,433)
Interim obligations, net 40,737 (39,944)
Payment of preferred stock dividends (23,364) (24,524)
Payment of common stock dividends (243,600) (224,100)
Miscellaneous (204) (6,824)
-------------- --------------
Net cash used for financing activities (373,271) (496,271)
-------------- --------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (12,130) 2,886
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 28,930 12,539
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 16,800 $ 15,425
============== ==============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for--
Interest (net of amount capitalized) $ 126,668 $ 154,187
Income taxes 166,178 133,939
The accompanying notes as they relate to GEORGIA are an integral part
of these condensed statements.
25
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GEORGIA POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
ASSETS
At June 30,
1996 At December 31,
(Unaudited) 1995
---------------- ---------------
<S> <C> <C>
UTILITY PLANT:
Plant in service $ 14,657,256 $ 14,538,595
Less accumulated provision for depreciation 4,622,807 4,417,120
---------------- ----------------
10,034,449 10,121,475
Nuclear fuel, at amortized cost 135,613 124,849
Construction work in progress 279,549 236,715
---------------- ----------------
Total 10,449,611 10,483,039
---------------- ----------------
OTHER PROPERTY AND INVESTMENTS:
Southern Electric Generating Company, at equity 26,401 27,232
Nuclear decommissioning trusts, at market 120,537 92,273
Miscellaneous 145,873 120,383
---------------- ----------------
Total 292,811 239,888
---------------- ----------------
CURRENT ASSETS:
Cash and cash equivalents 16,800 28,930
Special deposits - redemption funds 51,345 -
Receivables--
Customer accounts receivable 452,515 418,749
Other accounts and notes receivable 84,967 102,953
Affiliated companies 12,639 15,482
Accumulated provision for uncollectible accounts (5,000) (5,000)
Fossil fuel stock, at average cost 138,244 145,151
Materials and supplies, at average cost 285,159 286,804
Prepayments 119,463 107,764
Vacation pay deferred 40,188 35,543
---------------- ----------------
Total 1,196,320 1,136,376
---------------- ----------------
DEFERRED CHARGES:
Deferred charges related to income taxes 844,780 871,783
Deferred Plant Vogtle costs (Note K) 240,645 307,638
Premium on reacquired debt, being amortized 168,056 174,018
Debt expense, being amortized 26,542 27,227
Miscellaneous 195,367 230,306
---------------- ----------------
Total 1,475,390 1,610,972
---------------- ----------------
TOTAL ASSETS $ 13,414,132 $ 13,470,275
================ ================
The accompanying notes as they relate to GEORGIA are an integral part of
these condensed statements.
26
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GEORGIA POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
At June 30,
1996 At December 31,
(Unaudited) 1995
---------------- ---------------
<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 2,384,444 2,384,444
Premium on preferred stock 413 413
Retained earnings 1,594,995 1,569,905
---------------- ----------------
4,324,102 4,299,012
Preferred stock 617,787 692,787
Company obligated mandatorily redeemable preferred securities
of subsidiary substantially all of whose assets are Junior
Subordinated Debentures 100,000 100,000
Long-term debt 3,311,194 3,315,460
---------------- ----------------
Total 8,353,083 8,407,259
---------------- ----------------
CURRENT LIABILITIES:
Preferred stock due within one year 75,000 -
Long-term debt due within one year 59,736 150,446
Notes payable to banks 217,150 178,000
Commercial paper 223,917 222,330
Accounts payable--
Affiliated companies 81,094 72,878
Other 268,668 316,278
Customer deposits 59,500 53,145
Taxes accrued--
Federal and state income 29,929 7,759
Other 102,229 96,633
Interest accrued 93,018 96,162
Vacation pay accrued 38,739 34,233
Miscellaneous 122,168 137,184
---------------- ----------------
Total 1,371,148 1,365,048
---------------- ----------------
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes 2,514,472 2,510,458
Accumulated deferred investment tax credits 424,369 432,184
Deferred credits related to income taxes 398,097 410,016
Miscellaneous 352,963 345,310
---------------- ----------------
Total 3,689,901 3,697,968
---------------- ----------------
TOTAL CAPITALIZATION AND LIABILITIES $ 13,414,132 $ 13,470,275
================ ================
The accompanying notes as they relate to GEORGIA are an integral part of
these condensed statements.
27
</TABLE>
<PAGE>
GEORGIA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
SECOND QUARTER 1996 vs. SECOND QUARTER 1995
AND
YEAR-TO-DATE 1996 vs. YEAR-TO-DATE 1995
RESULTS OF OPERATIONS
Earnings
GEORGIA's net income after dividends on preferred stock for the second quarter
and year-to-date 1996 was $154.3 million and $268.7 million, respectively,
compared to $148.5 million and $264.7 million for the corresponding periods of
1995. Earnings increased by 3.9% for the quarter and 1.5% year-to-date primarily
as a result of increased retail revenues and lower interest costs.
Significant income statement items appropriate for discussion include the
following:
<TABLE>
<CAPTION>
Increase (Decrease)
-------------------------------------------------------
Second Quarter Year-To-Date
-------------------------- ----------------------------
(in thousands) % (in thousands) %
<S> <C> <C> <C> <C>
Revenues............................................. $ 71,940 6.8 $126,246 6.3
Fuel expense......................................... (17,121) (7.4) (29,570) (6.8)
Purchased power from affiliates...................... 29,126 103.4 64,872 112.1
Provision for separation benefits.................... 5,455 186.9 22,895 575.4
Other operation expense.............................. 19,146 10.9 23,017 6.8
Depreciation and amortization expense................ 8,415 8.5 19,775 10.1
Other, net........................................... (28,816) (124.7) (26,755) (154.1)
Income taxes applicable to other income.............. 17,257 (116.1) 13,834 (122.3)
Interest on long-term debt........................... (16,213) (23.5) (31,348) (22.8)
</TABLE>
Revenues. Excluding fuel revenues, which represent the pass-through of fuel
expenses and do not affect income, revenues for the second quarter increased
$50.5 million and for year-to-date increased $76.9 million, compared to the
corresponding periods of 1995. The increase in revenues was influenced most
heavily by an increase in the amount of retail energy sold. Retail kilowatt-hour
sales increased 6.1% for the current quarter and 6.6% year-to-date as compared
to the corresponding periods of 1995. Retail revenues, excluding fuel revenues,
increased 5.7% or $42.8 million for the current quarter and 5.4% or $76.6
million year-to-date. Residential, commercial and industrial energy sales for
the second quarter and year-to-date 1996 increased 10.4% and 10.7%; 5.2% and
6.9%; and 4.3% and 3.7%, respectively. Warmer-than-usual weather during late
spring and a slight increase in the number of customers served had a positive
effect on retail sales. Energy sales to non-affiliated wholesale customers for
the second quarter and year-to-date 1996 increased 5.5% and 10.7%, respectively,
compared to the corresponding periods of 1995 primarily due to increased demand
by municipalities and cooperatives in Georgia. However, capacity revenues from
sales to non-affiliated utilities outside the service territory fell $2.7
million for the quarter and $13.0 million year-to-date primarily due to the
scheduled decline in megawatts of capacity under long-term contracts.
Fuel expense. Fuel expense decreased primarily due to a decrease in
generation resulting from the timing of maintenance at fossil plants and a
slightly lower average cost of fuel. (See Purchased power from affiliates
below.)
28
<PAGE>
GEORGIA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Purchased power from affiliates. As a result of the timing of maintenance
at fossil plants discussed above, purchased power from affiliates increased
compared to the same periods of 1995. Purchased power transactions 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.
Provision for separation benefits. The increase in provision for separation
benefits for each period is attributable to work force reduction programs, which
have been implemented to control growth in future operating expenses. See Note
(G) to the Condensed Financial Statements herein for further details.
Other operation expense. Other operation expense increased for the quarter
and year-to-date 1996 primarily as a result of increased cost under a new
three-year retail rate plan effective January 1, 1996, and an adjustment to a
deferred regulatory asset as a result of changes in GEORGIA's retiree benefits
plan.
Depreciation and amortization expense. Depreciation and amortization
increased in each period primarily due to accelerated depreciation of generating
plants pursuant to a new retail rate plan effective January 1, 1996, an increase
in plant-in-service and an increase in nuclear decommissioning expense.
Other, net and Income taxes applicable to other income. The primary reason
for the decrease in these two items for the quarter and year-to-date 1996 was
due to the completion of the sale, in June 1995, of Plant Scherer Unit 4 which
resulted in an after-tax gain of approximately $12 million.
Interest on long-term debt. The decline in interest on long-term debt
reflects the redemption and refinancing of long-term debt.
Future Earnings Potential
The results of operations discussed above are not necessarily indicative of
future earnings potential. The level of future earnings depends on numerous
factors ranging from energy sales growth to a less regulated, more competitive
environment.
With the enactment of the Energy Act and new legislation being discussed at
federal and state levels to expand customer choice, the Southern electric system
is positioning the business to meet the challenge of increasing competition. For
additional information, see Item 1 - BUSINESS - "Competition" and Item 7 -
MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings Potential" of GEORGIA in
the Form 10-K.
Effective January 1, 1996, GEORGIA began operating under a three-year
retail rate plan. Under the plan, GEORGIA's earnings will be evaluated against a
retail return on common equity range of 10% to 12.5%. GEORGIA is required to
absorb cost increases of approximately $29.0 million annually during the plan's
three-year operation, including $14.0 million annually of accelerated
depreciation of electric plant. Reference is made to Note (J) to the Condensed
Financial Statements herein for additional information.
Compliance costs related to the Clean Air Act could affect earnings if such
costs cannot be offset. For additional information about the Clean Air Act and
other environmental issues, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS
"Environmental Issues" of GEORGIA in the Form 10-K.
29
<PAGE>
GEORGIA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Reference is made to Notes (B), (C), (F) and (J) through (P) in the "Notes
to the Condensed Financial Statements" herein for discussion of various
contingencies and other matters which may affect future earnings potential.
Reference is also made to Part II - Item 1 - "Legal Proceedings" herein.
FINANCIAL CONDITION
Overview
The major change in GEORGIA's financial condition during the first six months of
1996 was the addition of approximately $242.5 million to utility plant. These
additions were primarily related to transmission and distribution facilities and
to the purchase of nuclear fuel. The funds for these additions and other capital
requirements were derived primarily from operations. See GEORGIA's Condensed
Statements of Cash Flows for further details.
Financing Activities
During the first quarter of 1996, $150.0 million of GEORGIA's first mortgage
bonds matured, and GEORGIA sold $10.0 million of medium-term notes and redeemed
$6.8 million of industrial development bonds. In June 1996, GEORGIA sold,
through a public authority, $51.3 million of variable rate pollution control
revenue bonds due 2023, and the proceeds were applied to the redemption on July
1, 1996 of $51.3 million outstanding principal amount of 7.25% pollution control
revenue bonds.
On August 2, 1996, GEORGIA redeemed in full all $75.0 million outstanding
shares of its $7.80 preferred stock at the redemption price of $101.82 per
share, plus accrued dividends. GEORGIA plans to continue, to the extent
possible, a program to retire higher-cost debt and preferred stock and replace
these securities with lower-cost capital.
Capital Requirements
Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS of GEORGIA
under "Liquidity and Capital Requirements" and "Environmental Issues" in the
Form 10-K for a description of GEORGIA's capital requirements for its
construction program and environmental compliance efforts. Approximately $59.7
million will be required by June 30, 1997, in connection with redemptions and
maturities of long-term debt.
Sources of Capital
In addition to the financing activities previously described herein, GEORGIA
plans to obtain the funds required for construction and other purposes from
sources similar to those used in the past. The amount, type and timing of any
financings--if needed--will depend upon maintenance of adequate earnings,
regulatory approval, prevailing market conditions and other factors. Currently,
GEORGIA expects to have adequate earnings coverage ratios for any anticipated
security sales through at least 1998. See Item 1 - BUSINESS - "Financing
Programs" in the Form 10-K for additional information.
To meet short-term cash needs and contingencies, GEORGIA had at June 30,
1996, approximately $16.8 million of cash and cash equivalents and approximately
$792.2 million of unused credit arrangements with banks (including $527.2
million of such arrangements under which borrowings may be made only to fund
30
<PAGE>
GEORGIA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
purchase obligations relating to variable rate pollution control bonds). At June
30, 1996, GEORGIA had outstanding $217.2 million of short-term notes payable to
banks and $223.9 million of commercial paper. Since GEORGIA has no major
generating plants under construction, management believes that the need for
working capital can be adequately met by utilizing lines of credit without
maintaining large cash balances.
31
<PAGE>
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 June 30, 1996, and the related condensed
statements of income for the three-month and six-month periods ended June 30,
1996 and 1995, and the condensed statements of cash flows for the six-month
periods ended June 30, 1996 and 1995. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of GEORGIA POWER COMPANY as of December 31, 1995
(not presented herein), and, in our report dated February 21, 1996, 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, 1995, 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
August 8, 1996
32
<PAGE>
GULF POWER COMPANY
33
<PAGE>
<TABLE>
<CAPTION>
GULF POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Stated in Thousands of Dollars)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------- ------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Revenues $ 150,323 $ 147,330 $ 303,993 $ 283,106
Revenues from affiliates 3,498 5,727 4,749 10,869
------------ ------------ ------------- ------------
Total operating revenues 153,821 153,057 308,742 293,975
------------ ------------ ------------- ------------
OPERATING EXPENSES:
Operation--
Fuel 45,922 49,278 84,135 93,232
Purchased power from non-affiliates 2,187 1,768 3,863 3,067
Purchased power from affiliates 6,023 4,146 25,342 10,188
Other 29,102 26,575 54,738 54,857
Maintenance 14,315 13,345 29,362 22,977
Depreciation and amortization 14,089 13,694 28,174 27,349
Taxes other than income taxes 12,384 12,006 25,850 23,888
Federal and state income taxes 8,234 8,855 15,512 15,524
------------ ------------ ------------- ------------
Total operating expenses 132,256 129,667 266,976 251,082
------------ ------------ ------------- ------------
OPERATING INCOME 21,565 23,390 41,766 42,893
OTHER INCOME (EXPENSE):
Allowance for equity funds used during construction 2 21 11 47
Interest income 417 259 766 913
Other, net (276) (137) (747) (295)
Income taxes applicable to other income (97) (101) (93) (351)
------------ ------------ ------------- ------------
INCOME BEFORE INTEREST CHARGES 21,611 23,432 41,703 43,207
------------ ------------ ------------- ------------
INTEREST CHARGES:
Interest on long-term debt 6,236 5,951 12,384 11,871
Other interest charges 223 489 505 705
Interest on notes payable 625 945 1,129 1,765
Amortization of debt discount, premium, and expense, net 518 518 1,043 1,017
Allowance for debt funds used during construction (10) (31) (58) (66)
------------ ------------ ------------- ------------
Net interest charges 7,592 7,872 15,003 15,292
------------ ------------ ------------- ------------
NET INCOME 14,019 15,560 26,700 27,915
DIVIDENDS ON PREFERRED STOCK 1,438 1,464 2,861 2,939
------------ ------------ ------------- ------------
NET INCOME AFTER DIVIDENDS ON
PREFERRED STOCK $ 12,581 $ 14,096 $ 23,839 $ 24,976
============ ============ ============= ============
The accompanying notes as they relate to GULF are an integral part
of these condensed statements.
34
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GULF POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Stated in Thousands of Dollars)
For the Six Months
Ended June 30,
-------------------
1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 26,700 $ 27,915
Adjustments to reconcile net income to net cash provided by
operating activities--
Depreciation and amortization 37,052 38,021
Deferred income taxes, net 1,483 (2,079)
Allowance for equity funds used during construction (11) (47)
Other, net 4,832 2,754
Changes in certain current assets and liabilities--
Receivables, net (7,004) (14,036)
Inventories 5,759 445
Payables (7,546) 10,079
Taxes accrued 12,753 5,803
Other (10,925) (3,919)
------------- ------------
Net cash provided from operating activities 63,093 64,936
------------- ------------
INVESTING ACTIVITIES:
Gross property additions (38,212) (29,909)
Other (2,583) (2,281)
------------- ------------
Net cash used for investing activities (40,795) (32,190)
------------- ------------
FINANCING ACTIVITIES:
Proceeds--
First mortgage bonds 30,000 -
Pollution control bonds 33,275 -
Other long-term debt 22,148 -
Retirements--
Preferred stock subject to mandatory redemption - (1,000)
First mortgage bonds (1,750) (1,750)
Pollution control bonds (33,275) -
Other long-term debt (27,263) (6,623)
Notes payable, net (16,000) 2,500
Payment of preferred stock dividends (2,861) (2,939)
Payment of common stock dividends (24,700) (23,000)
Miscellaneous (1,754) (19)
------------- ------------
Net cash used for financing activities (22,180) (32,831)
------------- ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 118 (85)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 680 902
------------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 798 $ 817
============= ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for--
Interest (net of amount capitalized) $ 12,850 $ 12,570
Income taxes 4,271 17,009
The accompanying notes as they relate to GULF are an integral part of
these condensed statements.
35
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GULF POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
ASSETS
At June 30,
1996 At December 31,
(Unaudited) 1995
--------------- ----------------
<S> <C> <C>
UTILITY PLANT:
Plant in service $ 1,710,990 $ 1,695,814
Less accumulated provision for depreciation 681,291 658,806
--------------- --------------
1,029,699 1,037,008
Construction work in progress 41,923 26,301
--------------- --------------
Total 1,071,622 1,063,309
--------------- --------------
OTHER PROPERTY AND INVESTMENTS: 655 740
--------------- --------------
CURRENT ASSETS:
Cash and cash equivalents 798 680
Receivables--
Customer accounts receivable 75,482 69,166
Other accounts and notes receivable 2,761 3,393
Affiliated companies 2,102 802
Accumulated provision for uncollectible accounts (747) (768)
Fossil fuel stock, at average cost 33,713 37,875
Materials and supplies, at average cost 32,088 33,686
Current portion of deferred coal contract costs 15,971 12,767
Regulatory clauses under recovery 8,950 3,432
Prepaid income taxes - 4,232
Other prepayments 9,058 8,000
Vacation pay deferred 4,419 4,419
--------------- --------------
Total 184,595 177,684
--------------- --------------
DEFERRED CHARGES:
Deferred charges related to income taxes 28,824 29,093
Debt expense and loss, being amortized 21,025 20,459
Deferred coal contract costs 24,365 33,768
Deferred storm charges 5,664 7,502
Miscellaneous 10,461 9,304
--------------- --------------
Total 90,339 100,126
--------------- --------------
TOTAL ASSETS $ 1,347,211 $ 1,341,859
=============== ==============
The accompanying notes as they relate to GULF are an integral part of
these condensed statements.
36
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GULF POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
At June 30,
1996 At December 31,
(Unaudited) 1995
--------------- ----------------
<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 218,438 218,438
Premium on preferred stock 81 81
Retained earnings 178,772 179,663
--------------- --------------
435,351 436,242
Preferred stock 89,602 89,602
Long-term debt 362,415 323,376
--------------- --------------
Total 887,368 849,220
--------------- --------------
CURRENT LIABILITIES:
Long-term debt due within one year 15,528 31,548
Notes payable 64,500 80,500
Accounts payable--
Affiliated companies 10,334 14,447
Other 21,732 27,196
Customer deposits 13,317 13,195
Taxes accrued--
Federal and state income 9,717 -
Other 12,348 9,547
Interest accrued 6,804 5,719
Regulatory clauses over recovery 2,919 2,800
Vacation pay accrued 4,419 4,419
Miscellaneous 4,886 7,356
--------------- --------------
Total 166,504 196,727
--------------- --------------
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes 161,044 162,345
Deferred credits related to income taxes 65,999 67,481
Accumulated deferred investment tax credits 34,876 36,052
Accumulated provision for postretirement benefits 17,295 16,301
Miscellaneous 14,125 13,733
--------------- --------------
Total 293,339 295,912
--------------- --------------
TOTAL CAPITALIZATION AND LIABILITIES $ 1,347,211 $ 1,341,859
=============== ==============
The accompanying notes as they relate to GULF are an integral part of
these condensed statements.
37
</TABLE>
<PAGE>
GULF POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
SECOND QUARTER 1996 vs. SECOND QUARTER 1995
AND
YEAR-TO-DATE 1996 vs. YEAR-TO-DATE 1995
RESULTS OF OPERATIONS
Earnings
GULF's net income after dividends on preferred stock for the second quarter and
year-to-date 1996 was $12.6 million and $23.8 million, respectively, compared to
$14.1 million and $25.0 million for the corresponding periods of 1995. Earnings
decreased by 10.7% for the quarter and by 4.6% year-to-date primarily as a
result of increases in operating expenses.
Significant income statement items appropriate for discussion include the
following:
<TABLE>
<CAPTION>
Increase (Decrease)
----------------------------------------------------------
Second Quarter Year-To-Date
------------------------------ ---------------------------
(in thousands) % (in thousands) %
<S> <C> <C> <C> <C>
Revenues......................................... $2,993 2.0 $20,887 7.4
Fuel expense..................................... (3,356) (6.8) (9,097) (9.8)
Purchased power from affiliates.................. 1,877 45.3 15,154 148.7
Other operation expense.......................... 2,527 9.5 (119) (0.2)
Maintenance expense.............................. 970 7.3 6,385 27.8
</TABLE>
Revenues. Of the $20.9 million increase in revenues year-to-date 1996,
approximately $8.8 million impacted earnings. Territorial revenues, excluding
those revenues which represent the pass-through of fuel expense and certain
other expenses and do not affect income, increased $7.6 million. The increase in
retail revenues for the current year-to-date period was influenced significantly
by a 5.1% increase in total retail kilowatt-hour sales over the same period of
1995. The change in retail energy sales is primarily due to higher residential
and commercial sales as a result of colder-than-normal winter weather during the
first quarter of 1996 and a slight increase in the number of customers served.
Industrial sales and revenues were down for the quarter and year-to-date 1996
compared to the previous periods primarily because of increased sales in the
second quarter of 1995 to a large industrial customer who experienced mechanical
failures at its cogeneration facilities. The reduction in industrial revenues in
each period can also be attributed to increased participation in the
Real-Time-Pricing program. See Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS -
"Future Earnings Potential" of GULF in the Form 10-K for information on
initiatives to remain competitive and to meet conservation goals set by the
Florida PSC.
Fuel expense. The reduction in fuel expense is primarily attributable to
decreased generation due to the scheduled maintenance outages at Plant Crist and
Plant Daniel during the first half of 1996. (See Purchased power from affiliates
below.)
Purchased power from affiliates. As a result of the maintenance outages
mentioned above, purchased power from affiliates increased compared to the same
periods of 1995. Purchased power transactions among the affiliated companies
38
<PAGE>
GULF POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
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 expense. Other operation expense increased for the second
quarter 1996 primarily due to increases in various administrative and general
expenses, including expenses related to the approved increase of GULF's annual
accrual to the accumulated provision for property damage to amortize deferred
storm charges and restore the account balance to a reasonable level. For
additional information regarding the provision for property damage, see Item 7
MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings Potential" of GULF in
the Form 10-K. Costs associated with work force reduction programs also
contributed to the increase in other operation expense. For additional
information regarding work force reduction programs, see Note (G) to the
Condensed Financial Statements herein.
Maintenance expense. The increase in maintenance expense is primarily
attributable to the scheduled maintenance of production facilities at Plant
Crist and Plant Daniel during the first half of 1996.
Future Earnings Potential
The results of operations discussed above are not necessarily indicative of
future earnings potential. The level of future earnings depends on numerous
factors ranging from energy sales growth to a less regulated, more competitive
environment.
With the enactment of the Energy Act and new legislation being discussed at
federal and state levels to expand customer choice, the Southern electric system
is positioning the business to meet the challenge of increasing competition. In
September 1995, GULF filed with the Florida PSC a petition for approval of its
proposed Commercial/Industrial Service Rider (CISR), which would be applicable
to the rate schedules serving GULF's largest and most at-risk customers. On June
11, 1996, the Florida PSC denied GULF's petition. GULF plans to modify its
request for approval of the CISR after further discussions with the Florida PSC
staff. For additional information, see Item 7 MANAGEMENT'S DISCUSSION AND
ANALYSIS - "Future Earnings Potential" of GULF and Item 1 - BUSINESS -
"Competition" in the Form 10-K.
Compliance costs related to the Clean Air Act could affect earnings if such
costs are not fully recovered through GULF's environmental cost recovery clause.
For additional information about the Clean Air Act and other environmental
issues, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Environmental
Matters" of GULF in the Form 10-K.
Reference is made to Notes (B) and (F) in the "Notes to the Condensed
Financial Statements" herein for discussion of various contingencies and other
matters which may affect future earnings potential.
FINANCIAL CONDITION
Overview
The major change in GULF's financial condition during the first half of 1996 was
the addition of approximately $38.2 million to utility plant. The funds for
these additions and other capital requirements were derived primarily from
operations. See GULF's Condensed Statements of Cash Flows for further details.
39
<PAGE>
GULF POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Financing Activities
During the first quarter of 1996, GULF sold $30.0 million of first mortgage
bonds; sold, through a public authority, $21.2 million of pollution control
revenue refunding bonds; issued a $22.1 million bank note; and retired $1.8
million of first mortgage bonds. Under the terms of GULF's supplemental
indenture dated as of January 1, 1996, retained earnings of $127 million were
restricted against the payment of cash dividends on common stock at June 30,
1996.
In April 1996, GULF sold, through a public authority, $12.075 million of
5.25% pollution control revenue refunding bonds due 2006. The proceeds were
applied to the redemption in May 1996 of $12.075 million outstanding principal
amount of 6% pollution control revenue bonds. During the second quarter, GULF
also redeemed $21.2 million outstanding principal amount of 7.125% pollution
control revenue refunding bonds and retired a $25.0 million bank note that
matured in June 1996. GULF plans to continue, to the extent possible, a program
to retire higher-cost debt and preferred stock and replace these securities with
lower-cost capital.
Capital Requirements
Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS of GULF under
"Capital Requirements for Construction," "Environmental Matters" and "Other
Capital Requirements" in the Form 10-K for a description of GULF's capital
requirements for its construction program, environmental compliance efforts and
maturing debt. Approximately $15.5 million will be required by June 30, 1997,
for maturities of long-term debt.
Sources of Capital
In addition to the financing activities previously described herein, GULF plans
to obtain the funds required for construction and other purposes from sources
similar to those used in the past. The amount, type and timing of any
financings--if needed--will depend upon maintenance of adequate earnings,
regulatory approval, prevailing market conditions and other factors. Currently,
GULF expects to have adequate earnings coverage ratios for any anticipated
security sales through at least 1998. See Item 1 - BUSINESS - "Financing
Programs" in the Form 10-K for additional information.
To meet short-term cash needs and contingencies, GULF had at June 30, 1996,
approximately $0.8 million of cash and cash equivalents and $56.8 million of
unused committed lines of credit with banks (including $20.3 million liquidity
support for variable rate pollution control bonds). At June 30, 1996, GULF had
outstanding $64.5 million of short-term notes payable to banks. Since GULF has
no major generating plants under construction, management believes that the need
for working capital can be adequately met by utilizing lines of credit without
maintaining large cash balances.
40
<PAGE>
MISSISSIPPI POWER COMPANY
41
<PAGE>
<TABLE>
<CAPTION>
MISSISSIPPI POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Stated in Thousands of Dollars)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------- ---------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Revenues $ 130,340 $ 126,903 $ 255,300 $ 234,102
Revenues from affiliates 6,409 1,601 8,403 3,974
------------ ------------ ------------ ------------
Total operating revenues 136,749 128,504 263,703 238,076
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Operation--
Fuel 36,577 28,536 66,477 53,326
Purchased power from non-affiliates 4,243 996 5,936 1,912
Purchased power from affiliates 7,521 12,992 20,519 22,539
Other 26,514 25,361 51,272 50,695
Maintenance 14,542 8,912 24,838 17,439
Depreciation and amortization 11,980 10,155 23,353 20,072
Taxes other than income taxes 10,727 9,826 21,450 19,204
Federal and state income taxes 6,954 9,533 14,093 14,967
------------ ------------ ------------ ------------
Total operating expenses 119,058 106,311 227,938 200,154
------------ ------------ ------------ ------------
OPERATING INCOME 17,691 22,193 35,765 37,922
OTHER INCOME (EXPENSE):
Allowance for equity funds used during construction 29 54 124 177
Interest income 122 7 178 32
Other, net 1,302 749 2,732 2,111
Income taxes applicable to other income (471) (157) (1,023) (536)
------------ ------------ ------------ ------------
INCOME BEFORE INTEREST CHARGES 18,673 22,846 37,776 39,706
------------ ------------ ------------ ------------
INTEREST CHARGES:
Interest on long-term debt 4,935 5,636 10,428 11,293
Allowance for debt funds used during construction (212) (151) (316) (222)
Interest on notes payable 621 371 851 571
Amortization of debt discount, premium, and expense, net 396 372 769 745
Other interest charges 309 657 500 864
------------ ------------ ------------ ------------
Net interest charges 6,049 6,885 12,232 13,251
------------ ------------ ------------ ------------
NET INCOME 12,624 15,961 25,544 26,455
DIVIDENDS ON PREFERRED STOCK 1,224 1,224 2,449 2,449
------------ ------------ ------------ ------------
NET INCOME AFTER DIVIDENDS ON
PREFERRED STOCK $ 11,400 $ 14,737 $ 23,095 $ 24,006
============ ============ ============ ============
The accompanying notes as they relate to MISSISSIPPI are an integral
part of these condensed statements.
42
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MISSISSIPPI POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Stated in Thousands of Dollars)
For the Six Months
Ended June 30,
------------------
1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 25,544 $ 26,455
Adjustments to reconcile net income to net cash provided by
operating activities--
Depreciation and amortization 26,802 26,517
Deferred income taxes (2,233) (949)
Allowance for equity funds used during construction (124) (177)
Other, net (1,630) 4,336
Changes in certain current assets and liabilities--
Receivables, net (8,281) (12,078)
Inventories 2,195 (115)
Payables (3,295) 7,325
Taxes accrued (11,164) (11,046)
Other (1,184) 1,494
------------ ------------
Net cash provided from operating activities 26,630 41,762
------------ ------------
INVESTING ACTIVITIES:
Gross property additions (28,810) (36,828)
Other (1,769) (3,209)
------------ ------------
Net cash used for investing activities (30,579) (40,037)
------------ ------------
FINANCING ACTIVITIES:
Proceeds--
Capital contribution 27 -
Other long-term debt 30,000 -
Retirements--
First mortgage bonds (45,447) -
Other long-term debt (20,000) (6,189)
Notes payable, net 55,000 27,000
Payment of preferred stock dividends (2,449) (2,449)
Payment of common stock dividends (21,300) (19,500)
Miscellaneous (2,932) (500)
------------ ------------
Net cash used for financing activities (7,101) (1,638)
------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (11,050) 87
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 12,641 1,317
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,591 $ 1,404
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for--
Interest (net of amount capitalized) $ 11,647 $ 11,820
Income taxes 14,472 11,222
The accompanying notes as they relate to MISSISSIPPI are an integral part
of these condensed statements.
43
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MISSISSIPPI POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
ASSETS
At June 30,
1996 At December 31,
(Unaudited) 1995
----------- ---------------
<S> <C> <C>
UTILITY PLANT:
Plant in service, at original cost $ 1,446,979 $ 1,434,327
Less accumulated provision for depreciation 516,096 499,308
-------------- --------------
930,883 935,019
Construction work in progress 51,473 41,210
-------------- --------------
Total 982,356 976,229
-------------- --------------
OTHER PROPERTY AND INVESTMENTS: 3,108 4,160
-------------- --------------
CURRENT ASSETS:
Cash and cash equivalents 1,591 12,641
Receivables--
Customer accounts receivable 36,245 30,761
Other accounts and notes receivable 9,413 9,438
Affiliated companies 11,964 9,213
Accumulated provision for uncollectible accounts (731) (802)
Fossil fuel stock, at average cost 14,501 15,666
Materials and supplies, at average cost 21,528 22,558
Current portion of deferred fuel charges 73 1,546
Current portion of accumulated deferred income taxes 4,513 5,180
Prepayments 4,705 2,404
Vacation pay deferred 4,645 4,715
-------------- --------------
Total 108,447 113,320
-------------- --------------
DEFERRED CHARGES:
Debt expense and loss, being amortized 12,844 10,039
Deferred charges related to income taxes 23,176 23,384
Deferred early retirement program costs 6,791 7,286
Miscellaneous 14,830 14,535
-------------- --------------
Total 57,641 55,244
-------------- --------------
TOTAL ASSETS $ 1,151,552 $ 1,148,953
============== ==============
The accompanying notes as they relate to MISSISSIPPI are an integral part
of these condensed statements.
44
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MISSISSIPPI POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
At June 30,
1996 At December 31,
(Unaudited) 1995
-------------- ---------------
<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 179,389 179,362
Premium on preferred stock 372 372
Retained earnings 159,254 157,459
-------------- --------------
376,706 374,884
Preferred stock 74,414 74,414
Long-term debt 276,235 288,820
-------------- --------------
Total 727,355 738,118
-------------- --------------
CURRENT LIABILITIES:
Long-term debt due within one year 35,010 57,229
Notes payable 55,000 -
Accounts payable--
Affiliated companies 8,342 13,646
Other 37,372 37,129
Customer deposits 2,785 2,716
Taxes accrued--
Federal and state income 2,888 97
Other 17,861 31,816
Interest accrued 4,348 4,701
Miscellaneous 13,225 13,453
-------------- --------------
Total 176,831 160,787
-------------- --------------
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes 128,059 129,711
Accumulated deferred investment tax credits 29,055 29,773
Deferred credits related to income taxes 41,829 43,266
Accumulated provision for property damage 12,205 12,018
Miscellaneous 36,218 35,280
-------------- --------------
Total 247,366 250,048
-------------- --------------
TOTAL CAPITALIZATION AND LIABILITIES $ 1,151,552 $ 1,148,953
============== ==============
The accompanying notes as they relate to MISSISSIPPI are an integral
part of these condensed statements.
45
</TABLE>
<PAGE>
MISSISSIPPI POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
SECOND QUARTER 1996 vs. SECOND QUARTER 1995
AND
YEAR-TO-DATE 1996 vs. YEAR-TO-DATE 1995
RESULTS OF OPERATIONS
Earnings
MISSISSIPPI's net income after dividends on preferred stock for the second
quarter and year-to-date 1996 was $11.4 million and $23.1 million, respectively,
compared to $14.7 million and $24.0 million for the corresponding periods of
1995. The 22.6% decrease in earnings for the current quarter was primarily due
to an increase in operating expenses. To a lesser extent, such increase in
operating expenses also affected year-to-date earnings as evidenced by the 3.8%
decrease as compared to prior year.
Significant income statement items appropriate for discussion include the
following:
<TABLE>
<CAPTION>
Increase (Decrease)
--------------------------------------------------------
Second Quarter Year-To-Date
--------------------------- ----------------------------
(in thousands) % (in thousands) %
<S> <C> <C> <C> <C>
Revenues........................................... $3,437 2.7 $21,198 9.1
Fuel expense....................................... 8,041 28.2 13,151 24.7
Purchased power from non-affiliates................ 3,247 326.0 4,024 210.5
Purchased power from affiliates.................... (5,471) (42.1) (2,020) (9.0)
Maintenance expense................................ 5,630 63.2 7,399 42.4
Depreciation and amortization expense.............. 1,825 18.0 3,281 16.3
Taxes other than income taxes...................... 901 9.2 2,246 11.7
</TABLE>
Revenues. For the year-to-date period, the increase in revenues was due
primarily to a 6.3% increase in the amount of retail energy sold over the same
period of 1995. Retail revenues, excluding those revenues which represent the
recovery of fuel expense and certain other expenses and do not affect income,
increased $7.2 million. Colder-than-normal weather during the first three months
of 1996, warmer-than-usual weather during May, and a slight increase in the
number of customers served had a positive effect on 1996 year-to-date retail
sales. Sales to territorial wholesale customers were also positively impacted by
weather and customer growth. Year-to-date 1996 revenues from territorial
wholesale customers, excluding fuel revenues which do not affect income,
increased $10.9 million compared to the same period of 1995, with an increase in
energy sales of 13.0%.
Fuel expense. The increase in fuel expense for the second quarter and
year-to-date 1996 as compared to the corresponding periods of 1995 can be
attributed to higher generation necessary to meet the increased demand for
electricity.
Purchased power from non-affiliates. The increase in expense for this item
results primarily from the purchase, beginning in June 1996, of capacity and
energy from another utility as discussed later under "Future Earnings
Potential."
46
<PAGE>
MISSISSIPPI POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Purchased power from affiliates. Purchased power transactions 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.
Maintenance expense. The increase in maintenance expense for the current
quarter is primarily attributable to maintenance performed at Plant Watson and
other projects during the second quarter of 1996. These same factors also
contributed to the increase in maintenance expense year-to-date 1996 in addition
to the maintenance performed at Plant Daniel in the first quarter of 1996. In
1995, maintenance normally performed during the first quarter was postponed
until the fourth quarter.
Depreciation and amortization expense. Additional plant investment, higher
depreciation rates beginning in 1996, and increased amortization of regulatory
assets, primarily those assets related to the ECO plan, accounted for the
increases in this item.
Taxes other than income taxes. Taxes other than income taxes increased in
each period due to higher retail revenues which resulted in higher municipal
franchise fees.
Future Earnings Potential
The results of operations discussed above are not necessarily indicative of
future earnings potential. The level of future earnings depends on numerous
factors ranging from energy sales growth to a less regulated, more competitive
environment. Operating revenues will be affected by any changes in rates under
the PEP and ECO plans. The PEP has proven to be a stabilizing force on electric
rates, with only moderate changes in rates taking place. MISSISSIPPI has filed
with the Mississippi PSC the semi-annual PEP evaluation for the period ended
June 30, 1996. This filing indicated a retail revenue increase of $6.2 million
which is 1.46% of annual retail revenue. Mississippi PSC action on this
evaluation is expected later in 1996. MISSISSIPPI's 1996 annual filing under the
ECO plan with the Mississippi PSC resulted in an approved annual revenue
requirement decrease of $3.0 million, effective April 1996.
MISSISSIPPI has entered into agreements to purchase summer peaking power
and options for power for the years 1996 through 2000. For June through
September of 1996, MISSISSIPPI has entered into an agreement to buy 242
megawatts of capacity and energy from another electric utility. For June through
September of 1997 through 2000, MISSISSIPPI has purchased from power marketers
options for up to 250 megawatts of peaking power in 1997; 300 megawatts in 1998;
350 megawatts in 1999; and 400 megawatts in 2000. In June 1996, the Mississippi
PSC approved MISSISSIPPI's request that it be allowed to earn a return on the
capacity portion of these agreements.
With the enactment of the Energy Act and new legislation being discussed at
federal and state levels to expand customer choice, the Southern electric system
is positioning the business to meet the challenge of increasing competition. For
additional information, see Item 1 - BUSINESS - "Competition" and Item 7 -
MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings Potential" of
MISSISSIPPI in the Form 10-K.
Compliance costs related to the Clean Air Act could affect earnings if such
costs cannot be recovered. For additional information about the Clean Air Act
and other environmental issues, see Item 7 - MANAGEMENT'S DISCUSSION AND
ANALYSIS - "Environmental Matters" of MISSISSIPPI in the Form 10-K.
47
<PAGE>
MISSISSIPPI POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Reference is made to Notes (B) and (F) in the "Notes to the Condensed
Financial Statements" herein for discussion of various contingencies and other
matters which may affect future earnings potential. Reference is also made to
Part II - Item 1 - "Legal Proceedings" herein.
FINANCIAL CONDITION
Overview
The major change in MISSISSIPPI's financial condition during the first half of
1996 was the addition of approximately $28.8 million to utility plant. The funds
for these additions and other capital requirements were derived primarily from
operations and an increase in short-term debt. See MISSISSIPPI's Condensed
Statements of Cash Flows for further details.
Financing Activities
During the first quarter of 1996, maturities of long-term notes to banks totaled
$20.0 million. In April 1996, MISSISSIPPI issued a $30.0 million variable rate
bank note due 1999, and in May, MISSISSIPPI redeemed $45.4 million of its 9 1/4%
first mortgage bonds due 2021. MISSISSIPPI plans to continue, to the extent
possible, a program to retire higher-cost debt and preferred stock and replace
these securities with lower-cost capital.
Capital Requirements
Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS of
MISSISSIPPI under "Capital Requirements for Construction," "Environmental
Matters" and "Other Capital Requirements" in the Form 10-K for a description of
MISSISSIPPI's capital requirements for its construction program, environmental
compliance efforts, sinking fund requirements and maturities of long-term debt.
Through June 30, 1997, approximately $35.0 million will be required for
maturities of long-term debt.
Sources of Capital
In addition to the financing activities previously described herein, MISSISSIPPI
plans to obtain the funds required for construction and other purposes from
sources similar to those used in the past. The amount, type and timing of any
financings--if needed--will depend upon maintenance of adequate earnings,
regulatory approval, prevailing market conditions and other factors. Currently,
MISSISSIPPI expects to have adequate earnings coverage ratios for any
anticipated security sales through at least 1998. See Item 1 - BUSINESS -
"Financing Programs" in the Form 10-K for additional information.
To meet short-term cash needs and contingencies, MISSISSIPPI had at June
30, 1996, approximately $1.6 million of cash and cash equivalents and
approximately $96.0 million of unused committed credit arrangements with banks
(including $10.8 million of such arrangements under which borrowings may be made
only to fund purchase obligations relating to variable rate pollution control
bonds). At June 30, 1996, MISSISSIPPI had outstanding $55.0 million of
short-term notes payable to banks. Since MISSISSIPPI has no major generating
plants under construction, management believes that the need for working capital
can be adequately met by utilizing lines of credit without maintaining large
cash balances.
48
<PAGE>
SAVANNAH ELECTRIC
AND
POWER COMPANY
49
<PAGE>
<TABLE>
<CAPTION>
SAVANNAH ELECTRIC AND POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Stated in Thousands of Dollars)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------- ------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Revenues $ 61,183 $ 56,198 $ 110,550 $ 101,214
Revenues from affiliates 723 1,475 1,931 3,202
---------- ----------- ------------ ------------
Total operating revenues 61,906 57,673 112,481 104,416
---------- ----------- ------------ ------------
OPERATING EXPENSES:
Operation--
Fuel 8,743 8,141 12,692 9,491
Purchased power from non-affiliates 662 369 1,212 718
Purchased power from affiliates 15,670 12,208 31,520 27,444
Other 11,410 10,724 21,693 20,927
Maintenance 3,321 4,256 6,451 7,492
Depreciation and amortization 4,902 4,708 9,804 9,455
Taxes other than income taxes 3,158 2,959 6,178 5,920
Federal and state income taxes 4,254 4,388 6,583 6,581
---------- ----------- ------------ ------------
Total operating expenses 52,120 47,753 96,133 88,028
---------- ----------- ------------ ------------
OPERATING INCOME 9,786 9,920 16,348 16,388
OTHER INCOME (EXPENSE):
Allowance for equity funds used during construction 98 37 181 59
Interest income 103 92 105 101
Other, net (402) 19 (718) (114)
Income taxes applicable to other income 116 (43) 233 5
---------- ----------- ------------ ------------
INCOME BEFORE INTEREST CHARGES 9,701 10,025 16,149 16,439
---------- ----------- ------------ ------------
INTEREST CHARGES:
Interest on long-term debt 3,104 3,300 6,018 6,429
Allowance for debt funds used during construction (94) (122) (176) (195)
Interest on notes payable 36 39 138 123
Amortization of debt discount, premium, and expense, net 107 103 211 241
Other interest charges 108 83 197 218
---------- ----------- ------------ ------------
Net interest charges 3,261 3,403 6,388 6,816
---------- ----------- ------------ ------------
NET INCOME 6,440 6,622 9,761 9,623
DIVIDENDS ON PREFERRED STOCK 581 581 1,162 1,162
---------- ----------- ------------ ------------
NET INCOME AFTER DIVIDENDS ON
PREFERRED STOCK $ 5,859 $ 6,041 $ 8,599 $ 8,461
========== =========== ============ ============
The accompanying notes as they relate to SAVANNAH are an integral part
of these condensed statements.
50
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SAVANNAH ELECTRIC AND POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Stated in Thousands of Dollars)
For the Six Months
Ended June 30,
------------------
1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 9,761 $ 9,623
Adjustments to reconcile net income to net cash provided by
operating activities--
Depreciation and amortization 5,241 10,140
Deferred income taxes and investment tax credits, net 3,264 1,526
Allowance for equity funds used during construction (181) (59)
Other, net 1,444 461
Changes in certain current assets and liabilities--
Receivables, net (7,835) (5,123)
Inventories (608) 475
Payables 5,287 4,222
Taxes accrued 2,103 1,977
Other (2,503) (1,289)
------------ ------------
Net cash provided from operating activities 15,973 21,953
------------ ------------
INVESTING ACTIVITIES:
Gross property additions (15,150) (14,032)
Other 1,064 (220)
------------ ------------
Net cash used for investing activities (14,086) (14,252)
------------ ------------
FINANCING ACTIVITIES:
Proceeds--
First mortgage bonds 20,000 15,000
Other long-term debt 17,000 33,500
Retirements--
First mortgage bonds (1,200) (29,250)
Other long-term debt (146) (12,376)
Notes payable, net (4,000) (1,500)
Payment of preferred stock dividends (1,162) (1,162)
Payment of common stock dividends (9,600) (8,700)
Miscellaneous (257) (2,019)
------------ ------------
Net cash provided from (used for) financing activities 20,635 (6,507)
------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 22,522 1,194
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 877 1,563
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 23,399 $ 2,757
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for--
Interest (net of amount capitalized) $ 5,935 $ 6,987
Income taxes 2,547 3,891
The accompanying notes as they relate to SAVANNAH are an integral part
of these condensed statements.
51
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SAVANNAH ELECTRIC AND POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
ASSETS
At June 30,
1996 At December 31,
(Unaudited) 1995
------------ --------------
<S> <C> <C>
UTILITY PLANT:
Plant in service, at original cost $ 725,438 $ 715,146
Less accumulated provision for depreciation 295,544 287,004
------------ ------------
429,894 428,142
Construction work in progress 14,631 6,707
------------ ------------
Total 444,525 434,849
------------ ------------
OTHER PROPERTY AND INVESTMENTS: 1,787 1,788
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents 23,399 877
Receivables--
Customer accounts receivable 25,552 19,574
Other accounts and notes receivable 1,868 7,251
Affiliated companies 3,598 614
Accumulated provision for uncollectible accounts (934) (983)
Fuel cost under recovery 4,207 -
Fossil fuel stock, at average cost 6,466 6,076
Materials and supplies, at average cost 8,457 8,239
Prepayments 6,806 6,467
------------ ------------
Total 79,419 48,115
------------ ------------
DEFERRED CHARGES:
Deferred charges related to income taxes 21,200 21,557
Premium on reacquired debt, being amortized 5,135 5,316
Cash surrender value of life insurance for deferred compensation plans 8,560 8,560
Miscellaneous 4,310 4,477
------------ ------------
Total 39,205 39,910
------------ ------------
TOTAL ASSETS $ 564,936 $ 524,662
============ ============
The accompanying notes as they relate to SAVANNAH are an integral part of
these condensed statements.
52
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SAVANNAH ELECTRIC AND POWER COMPANY
CONDENSED BALANCE SHEETS
(Stated in Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
At June 30,
1996 At December 31,
(Unaudited) 1995
------------ ---------------
<S> <C> <C>
CAPITALIZATION:
Common stock equity--
Common stock (par value $5 per share)--
authorized 16,000,000 shares; outstanding 10,844,635 shares $ 54,223 $ 54,223
Paid-in capital 8,688 8,688
Additional minimum liability
for under-funded pension obligations (1,116) (132)
Retained earnings 104,031 105,033
------------ ------------
165,826 167,812
Preferred stock 35,000 35,000
Long-term debt 161,714 153,679
------------ ------------
Total 362,540 356,491
------------ ------------
CURRENT LIABILITIES:
Long-term debt due within one year 28,799 1,407
Notes payable - 4,000
Accounts payable--
Affiliated companies 6,710 5,742
Other 10,593 5,620
Fuel cost over recovery - 865
Customer deposits 5,129 5,054
Taxes accrued--
Federal and state income 1,108 570
Other 2,579 1,014
Interest accrued 6,610 6,331
Vacation pay accrued 1,954 1,916
Pensions accrued 395 685
Miscellaneous 4,378 5,185
------------ ------------
Total 68,255 38,389
------------ ------------
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes 76,133 74,152
Accumulated deferred investment tax credits 13,602 13,934
Deferred credits related to income taxes 24,132 24,419
Deferred compensation plans 8,156 7,690
Deferred under-funded accrued benefit obligation 3,727 2,123
Postretirement benefits 5,450 4,728
Miscellaneous 2,941 2,736
------------ ------------
Total 134,141 129,782
------------ ------------
TOTAL CAPITALIZATION AND LIABILITIES $ 564,936 $ 524,662
============ ============
The accompanying notes as they relate to SAVANNAH are an integral part of
these condensed statements.
53
</TABLE>
<PAGE>
SAVANNAH ELECTRIC AND POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
SECOND QUARTER 1996 vs. SECOND QUARTER 1995
AND
YEAR-TO-DATE 1996 vs. YEAR-TO-DATE 1995
RESULTS OF OPERATIONS
Earnings
SAVANNAH's net income after dividends on preferred stock for the second quarter
and year-to-date 1996 was $5.9 million and $8.6 million, respectively, compared
to $6.0 million and $8.5 million for the corresponding periods of 1995. For the
quarter, earnings decreased by 3.0% primarily due to an increase in operating
expenses while earnings for the year-to-date period remained fairly constant as
evidenced by a 1.6% increase.
Significant income statement items appropriate for discussion include the
following:
<TABLE>
<CAPTION>
Increase (Decrease)
---------------------------------------------------------
Second Quarter Year-To-Date
--------------------------- -----------------------------
(in thousands) % (in thousands) %
<S> <C> <C> <C> <C>
Revenues....................................... $4,985 8.9 $9,336 9.2
Fuel expense................................... 602 7.4 3,201 33.7
Purchased power from affiliates................ 3,462 28.4 4,076 14.9
Maintenance expense............................ (935) (22.0) (1,041) (13.9)
</TABLE>
Revenues. Excluding fuel revenues, which represent the pass-through of fuel
expenses and do not affect income, revenues for the quarter remained fairly
constant while revenues year-to-date 1996 increased approximately $392,000,
compared to the corresponding periods of 1995. The increase in year-to-date
revenues was due primarily to an increase in the amount of retail energy sold.
Year-to-date 1996 total retail kilowatt-hour sales increased 3.9% over the same
period of 1995, and retail revenues, excluding fuel revenues, increased
approximately $867,000. A slight increase in the number of customers served
accounted for most of the increase in residential and commercial demand;
however, kilowatt-hour sales to the industrial sector were down primarily due to
a reduction in the production schedule of one of SAVANNAH's major industrial
customers.
Fuel expense. The increase in fuel expense for year-to-date 1996 as
compared to the same period of 1995 can be attributed to higher generation
necessary to meet the increased demand for electricity and to an increase in the
average cost of fuel.
Purchased power from affiliates. Purchased power transactions 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.
Maintenance expense. Maintenance expense decreased in the quarter and
year-to-date 1996 as compared to previous periods primarily as a result of
higher-than-normal maintenance performed in 1995 at Plants Kraft and McIntosh.
54
<PAGE>
SAVANNAH ELECTRIC AND POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Future Earnings Potential
The results of operations discussed above are not necessarily indicative of
future earnings potential. The level of future earnings depends on numerous
factors ranging from energy sales growth to a less regulated, more competitive
environment.
With the enactment of the Energy Act and new legislation being discussed at
federal and state levels to expand customer choice, the Southern electric system
is positioning the business to meet the challenge of increasing competition. For
additional information, see Item 1 - BUSINESS - "Competition" and Item 7 -
MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings Potential" of SAVANNAH
in the Form 10-K.
Compliance costs related to the Clean Air Act could affect earnings if such
costs cannot be offset. For additional information about the Clean Air Act and
other environmental issues, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS
"Environmental Matters" of SAVANNAH in the Form 10-K.
Reference is made to Notes (B), (Q) and (R) in the "Notes to the Condensed
Financial Statements" herein for discussion of various contingencies and other
matters which may affect future earnings potential.
FINANCIAL CONDITION
Overview
The major change in SAVANNAH's financial condition during the first half of 1996
was the addition of approximately $15.2 million to utility plant. The funds for
these additions and other capital requirements were derived primarily from
internal sources and external financing. See SAVANNAH's Condensed Statements of
Cash Flows for further details.
Financing Activities
During the first three months of 1996, SAVANNAH retired $1.2 million of its 9
3/8% first mortgage bonds to meet sinking fund requirements and entered into
arrangements with the Savannah Economic Development Authority to provide $7.0
million for the financing of a new coal handling facility at Plant Kraft.
In May, 1996, SAVANNAH issued $20.0 million of 6.90% first mortgage bonds
due 2006 and a $10.0 million 6.88% bank note due 2001. The proceeds were used to
redeem on July 1, 1996 all remaining outstanding 9 3/8% first mortgage bonds due
2021. SAVANNAH plans to continue, to the extent possible, a program to retire
higher-cost debt and replace these obligations with lower-cost capital.
Capital Requirements
Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS of SAVANNAH
under "Capital Requirements for Construction," "Environmental Matters" and
"Other Capital Requirements" in the Form 10-K for a description of SAVANNAH's
capital requirements for its construction program, environmental compliance
efforts, sinking fund requirements and long-term debt maturities. Approximately
$28.8 million will be required by June 30, 1997, for maturities of long-term
debt.
55
<PAGE>
SAVANNAH ELECTRIC AND POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Sources of Capital
SAVANNAH plans to obtain the funds required for construction and other purposes
from sources similar to those used in the past. The amount, type and timing of
any financings--if needed--will depend upon maintenance of adequate earnings,
regulatory approval, prevailing market conditions and other factors. Currently,
SAVANNAH expects to have adequate earnings coverage ratios for any anticipated
security sales through at least 1998. See Item 1 - BUSINESS - "Financing
Programs" in the Form 10-K for additional information.
To meet short-term cash needs and contingencies, SAVANNAH had at June 30,
1996, approximately $23.4 million of cash and cash equivalents and approximately
$40.5 million of unused credit arrangements with banks. At June 30, 1996,
SAVANNAH had no short-term debt outstanding. Since SAVANNAH has no major
generating plants under construction, management believes that the need for
working capital can be adequately met by utilizing lines of credit.
56
<PAGE>
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
FOR
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
ALABAMA POWER COMPANY
GEORGIA POWER COMPANY
GULF POWER COMPANY
MISSISSIPPI POWER COMPANY
SAVANNAH ELECTRIC AND POWER COMPANY
INDEX TO APPLICABLE NOTES TO
FINANCIAL STATEMENTS BY REGISTRANT
Registrant Applicable Notes
SOUTHERN A, B, C, D, E, F, G, H, I, J, K, L, M, N, O, P, S
ALABAMA A, B, C, F, G, H, I, S
GEORGIA A, B, C, F, G, J, K, L, M, N, O, P
GULF A, B, F, G
MISSISSIPPI A, B, F, G
SAVANNAH A, B, Q, R
57
<PAGE>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
ALABAMA POWER COMPANY
GEORGIA POWER COMPANY
GULF POWER COMPANY
MISSISSIPPI POWER COMPANY
SAVANNAH ELECTRIC AND POWER COMPANY
NOTES TO THE CONDENSED FINANCIAL STATEMENTS:
(A) The condensed financial statements of the registrants included herein have
been prepared by each registrant, without audit, pursuant to the rules and
regulations of the SEC. In the opinion of each registrant's management, the
information regarding such registrant furnished herein reflects all
adjustments (which included only normal recurring adjustments) necessary to
present fairly the results for the periods ended June 30, 1996 and 1995.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although each registrant believes that the disclosures
regarding such registrant are adequate to make the information presented
not misleading. It is suggested that these condensed financial statements
be read in conjunction with the financial statements and the notes thereto
included in each registrant's latest annual report on Form 10-K. Certain
prior-period amounts have been reclassified to conform with current-period
presentation.
The condensed financial statements of ALABAMA and GEORGIA included
herein have been reviewed by ALABAMA's and GEORGIA's independent public
accountants as set forth in their reports included herein as Exhibit 1 to
ALABAMA's and GEORGIA's condensed financial statements.
(B) SOUTHERN's operating affiliates are subject to the provisions of FASB
Statement No. 71, Accounting for the Effects of Certain Types of
Regulation. In the event that a portion of a company's operations is no
longer subject to these provisions, the company would be required to write
off related regulatory assets and liabilities, and determine if any other
assets have been impaired. For additional information, see Note 1 to the
financial statements of each registrant in Item 8 of the Form 10-K.
(C) The staff of the SEC has questioned certain of the current accounting
practices of the electric utility industry--including SOUTHERN's--regarding
the recognition, measurement and classification of decommissioning costs
for nuclear generating facilities in the financial statements. In response
to these questions, the FASB has decided to review the accounting for
liabilities related to closure and removal of long-lived assets, including
nuclear decommissioning. Reference is made to MANAGEMENT'S DISCUSSION AND
ANALYSIS - "Future Earnings Potential" of SOUTHERN, ALABAMA and GEORGIA in
Item 7 and Note 1 to the financial statements of SOUTHERN, ALABAMA and
GEORGIA under "Depreciation and Nuclear Decommissioning" in Item 8 of the
Form 10-K.
(D) The SOUTHERN system utilizes certain financial derivative contracts solely
for the purpose of risk management. The companies' participation in
derivative contracts has been to hedge business exposure in connection with
SEI activities to fluctuations in interest rates and foreign currency
exchange rates. At June 30, 1996, the status of outstanding derivative
contracts was as follows:
Maturity or Notional Unrealized
Type Termination Amount Gain (Loss)
---- ----------- -------- -----------
(in thousands)
Interest rate swaps 1999-2011 $839,465 $(4,925)
Foreign currency forwards Renewed monthly 13,178 (70)
Cross-currency swaps 2002 164,586 (1,500)
58
<PAGE>
NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
(E) Reference is made to Note 3 to the financial statements of SOUTHERN in Item
8 of the Form 10-K for a description of the proceedings related to a
derivative action filed against certain current and former directors and
officers of SOUTHERN. In May 1996, a panel of the U.S. Court of Appeals for
the 11th Circuit affirmed the trial court's dismissal of this suit. The
plaintiffs' subsequent request for rehearing by the full appellate court
was denied in August 1996.
(F) Reference is made to Note 3 to each of the registrant's, except SAVANNAH's,
financial statements in Item 8 of the Form 10-K for a discussion of the
proceedings initiated by the FERC regarding the reasonableness of the
return on common equity on certain of the Southern electric system's
wholesale rate schedules and contracts.
(G) Certain of the registrants and other SOUTHERN subsidiaries have instituted
work force reduction programs. The expenses recognized and the unamortized
balance of deferred expenses under these programs were as follows: (in
thousands)
Three Months Ended Six Months Ended Unamortized Balance
June 30, June 30, at June 30, 1996
------------------ ------------------ --------------------
1996 1995 1996 1995
---- ---- ---- ----
ALABAMA $ 8,044 $2,859 $12,409 $4,304 $39,820
GEORGIA 8,374 2,919 26,874 3,979 -
GULF 1,275 - 2,234 - -
MISSISSIPPI 1,528 750 1,778 1,500 6,791
SAVANNAH 234 29 234 29 -
OTHER 26 - 214 - -
------- ------- ------- ------ -------
SOUTHERN
system $19,481 $6,557 $43,743 $9,812 $46,611
======= ====== ======= ====== =======
(H) In June 1995, the Alabama PSC issued a rate order granting ALABAMA's
request for gradual adjustments to move toward parity among customer
classes. This order also calls for a moratorium on any periodic retail rate
increases (but not decreases) until July 2001. In December 1995, the
Alabama PSC issued an order authorizing ALABAMA to reduce balance sheet
items--such as plant and deferred charges--at any time ALABAMA's actual
base rate revenues exceed the budgeted revenues. Reference is made to Note
3 to the financial statements of SOUTHERN and ALABAMA in Item 8 of the Form
10-K for additional information.
(I) In January 1996, Alabama Power Capital Trust I (the "Trust"), of which
ALABAMA owns all the common securities, issued $97 million of 7.375%
mandatorily redeemable preferred securities. Substantially all of the
assets of the Trust are $100 million aggregate principal amount of
ALABAMA's 7.375% Junior Subordinated Notes due March 31, 2026. ALABAMA
considers that the mechanisms and obligations relating to the preferred
securities, taken together, constitute a full and unconditional guarantee
by ALABAMA of the Trust's payment obligations with respect to the preferred
securities.
(J) On February 16, 1996, the Georgia PSC approved a three-year retail rate
plan for GEORGIA effective January 1, 1996. For additional information,
reference is made to Note 3 to the financial statements of SOUTHERN and
GEORGIA in Item 8 of the Form 10-K.
59
<PAGE>
NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
(K) 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 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 June 30,
1996, was $240.6 million. See Note 1 to the financial statements of
SOUTHERN and Note 3 to the financial statements of GEORGIA in Item 8 of the
Form 10-K for additional information.
(L) Reference is made to Note 3 to the financial statements of SOUTHERN and
GEORGIA in Item 8 of the Form 10-K for information concerning the recovery
by GEORGIA of its costs associated with the Rocky Mountain pumped storage
hydroelectric plant.
(M) Reference is made to Note 3 to the financial statements of SOUTHERN and
GEORGIA in Item 8 of the Form 10-K for information regarding recovery by
GEORGIA of its costs associated with its discontinued demand-side
conservation programs.
(N) Reference is made to Note 3 to the financial statements of GEORGIA in Item
8 of the Form 10-K for information concerning a joint complaint filed with
the FERC by OPC and MEAG seeking recovery of alleged partial requirements
rates overcharges and the order of the FERC dismissing such complaint. In
June 1996, the U.S. Court of Appeals for the District of Columbia Circuit
vacated the FERC's order insofar as it denied OPC's claim for a share of
the settlement proceeds that GEORGIA received from Gulf States Utilities
Company and remanded the case to the FERC.
(O) In May 1996, MEAG filed a complaint with the FERC seeking termination as of
December 31, 1996 of the partial requirements tariff pursuant to which
GEORGIA currently sells wholesale energy to MEAG. The complaint also seeks
refunds in an unspecified amount as a result of alleged overcharges by
GEORGIA under the tariff for the years 1993, 1994, 1995 and 1996. In its
response, filed with the FERC in June 1996, GEORGIA also requests that its
partial requirements service obligation to MEAG be terminated as of the
date sought by MEAG. GEORGIA further denies that any refund is owed to
MEAG.
(P) Reference is made to Note 3 to the financial statements of SOUTHERN and
GEORGIA in Item 8 of the Form 10-K for information regarding GEORGIA's
designation as a potentially responsible party under the Comprehensive
Environmental Response, Compensation and Liability Act and other
environmental contingencies.
(Q) Reference is made to Note 3 to the financial statements of SAVANNAH in Item
8 of the Form 10-K for information regarding SAVANNAH's discontinued
demand-side conservation programs.
(R) SAVANNAH is currently undergoing an earnings review by the Georgia PSC, and
to date, the Georgia PSC has made no determination.
(S) Actions against ALABAMA have been filed in several counties in Alabama
charging ALABAMA with fraud and non-compliance with regulatory statutes
relating to the offer, sale and financing of "extended service contracts"
in connection with the sale of electric appliances. Some of these cases are
60
<PAGE>
NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
filed as class actions, while others were filed on behalf of multiple
individual plaintiffs. The plaintiffs in these actions seek damages in an
unspecified amount. ALABAMA has offered extended service agreements to its
customers since January 1984, and approximately 175,000 extended service
agreements could be involved in these proceedings. The final outcome of
these cases cannot now be determined.
61
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
(1) Reference is made to the Notes to the Condensed
Financial Statements herein for information regarding
certain legal and administrative proceedings in which
SOUTHERN and its reporting subsidiaries are involved.
(2) Reference is made to Item 3 - LEGAL PROCEEDINGS in the
Form 10-K for information regarding a tax deficiency
notice received from the Internal Revenue Service
relating to GEORGIA's tax accounting for the sale in
1984 of an interest in Plant Vogtle and related capacity
and energy buyback commitments.
(3) Reference is made to Item 3 - LEGAL PROCEEDINGS in the
Form 10-K for information regarding an action filed by
ALABAMA, GEORGIA and MISSISSIPPI in January 1996 which
seeks to enjoin the TVA from violating a 1959 act that
prohibits the TVA from selling power outside the area
that was being served by it in 1957.
Item 4. Submission of Matters to a Vote of Security Holders.
SOUTHERN
SOUTHERN held its annual meeting of stockholders on May 22,
1996. Each nominee for director of SOUTHERN received the
requisite plurality of votes. The vote tabulation was as
follows:
Nominees Shares For Shares Withhold Vote
John C. Adams 522,076,544 7,177,822
A. D. Correll 521,816,820 7,437,546
A. W. Dahlberg 521,602,860 7,651,506
Paul J. DeNicola 521,415,232 7,839,134
Jack Edwards 516,908,334 12,346,032
H. Allen Franklin 521,287,128 7,967,238
Bruce S. Gordon 520,408,188 8,846,178
L. G. Hardman III 522,173,318 7,081,048
Elmer B. Harris 521,432,122 7,822,244
William A. Parker, Jr. 518,539,779 10,714,587
William J. Rushton, III 521,801,817 7,452,549
Gloria M. Shatto 521,914,454 7,469,162
Gerald J. St. Pe 522,307,900 6,946,466
Herbert Stockham 521,876,639 7,377,727
62
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders.(Continued)
ALABAMA
ALABAMA held its annual common stockholders meeting on April
26, 1996, and the following persons were elected to serve as
directors of ALABAMA:
Whit Armstrong John T. Porter
Philip E. Austin Gerald H. Powell
A. W. Dahlberg Robert D. Powers
Peter V. Gregerson, Sr. John W. Rouse
Bill M. Guthrie William J. Rushton, III
Elmer B. Harris James H. Sanford
Carl E. Jones, Jr. John Cox Webb, IV
Wallace D. Malone, Jr. John W. Woods
William V. Muse
All of the 5,608,955 outstanding shares of ALABAMA's common
stock are owned by SOUTHERN and were voted for the election of
such directors.
GEORGIA
By written consent, in lieu of the annual meeting of
stockholders of GEORGIA, effective May 15, 1996, the following
persons were elected to serve as directors of GEORGIA:
Bennett A. Brown William A. Parker, Jr.
A. W. Dahlberg G. Joseph Prendergast
William A. Fickling, Jr. Herman J. Russell
H. Allen Franklin Gloria M. Shatto
L. G. Hardman III William Jerry Vereen
Warren Y. Jobe Carl Ware
James R. Lientz, Jr. Thomas R. Williams
All of the 7,761,500 outstanding shares of GEORGIA's common
stock are owned by SOUTHERN and were voted for the election of
such directors.
GULF
GULF held its annual stockholders meeting on June 25, 1996, and
the following persons were elected to serve as directors of
GULF:
Reed Bell, Sr., M.D. W. Deck Hull, Jr.
Travis J. Bowden C. Walter Ruckel
Paul J. DeNicola Joseph K. Tannehill
Fred C. Donovan
All of the 992, 717 outstanding shares of GULF's common stock
are owned by SOUTHERN and were voted for the election of such
directors.
63
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders.(Continued)
MISSISSIPPI
MISSISSIPPI held its annual stockholders meeting on April 2,
1996, and the following persons were elected to serve as
directors of MISSISSIPPI:
Paul J. DeNicola Aubrey K. Lucas
Edwin E. Downer George A. Schloegel
Dwight H. Evans Philip J. Terrell
Robert S. Gaddis N. Eugene Warr
Walter H. Hurt, III
All of the 1,121,000 outstanding shares of MISSISSIPPI's common
stock are owned by SOUTHERN and were voted for the election of
such directors. Additionally, at such meeting, Article IV of
the bylaws of MISSISSIPPI, "Indemnification of Directors and
Officers," was amended in its entirety by unanimous vote of the
stockholder.
SAVANNAH
SAVANNAH held its annual stockholders meeting on May 21, 1996,
and the following persons were elected to serve as directors of
SAVANNAH:
Helen Quattlebaum Artley Walter D. Gnann
Paul J. DeNicola Robert B. Miller, III
Brian R. Foster Arnold M. Tenenbaum
Arthur M. Gignilliat, Jr. Frederick F. Williams, Jr.
All of the 10,844,635 outstanding shares of SAVANNAH's common
stock are owned by SOUTHERN and were voted for the election of
such directors.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit 24 - Powers of Attorney and resolutions.
(Designated in the Form 10-K for the year
ended December 31, 1995, File Nos. 1-3526,
1-3164, 1-6468, 0-2429, 0-6849 and 1-5072
as Exhibits 24(a), 24(b), 24(c), 24(d),
24(e) and 24(f), respectively, and
incorporated herein by reference.)
Exhibits 27 - Financial Data Schedules
(a) SOUTHERN
(b) ALABAMA
(c) GEORGIA
(d) GULF
(e) MISSISSIPPI
(f) SAVANNAH
64
<PAGE>
Item 6. Exhibits and Reports on Form 8-K. (Continued)
(b) Reports on Form 8-K.
SAVANNAH filed a Current Report on Form 8-K dated
May 23, 1996:
Items reported: Item 5
Item 7
Financial statements filed: None
65
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The signature of the undersigned company
shall be deemed to relate only to matters having reference to such company and
any subsidiaries thereof.
THE SOUTHERN COMPANY
By A. W. Dahlberg
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
By W. L. Westbrook
Financial Vice President, Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
By /s/ Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: August 12, 1996
- --------------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The signature of the undersigned company
shall be deemed to relate only to matters having reference to such company and
any subsidiaries thereof.
ALABAMA POWER COMPANY
By Elmer B. Harris
President and Chief Executive Officer
(Principal Executive Officer)
By William B. Hutchins, III
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
By /s/ Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: August 12, 1996
66
<PAGE>
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: August 12, 1996
- --------------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The signature of the undersigned company
shall be deemed to relate only to matters having reference to such company and
any subsidiaries thereof.
GULF POWER COMPANY
By Travis J. Bowden
President and Chief Executive Officer
(Principal Executive Officer)
By A. E. Scarbrough
Vice President - Finance
(Principal Financial and Accounting Officer)
By /s/ Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: August 12, 1996
67
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The signature of the undersigned company
shall be deemed to relate only to matters having reference to such company and
any subsidiaries thereof.
MISSISSIPPI POWER COMPANY
By Dwight H. Evans
President and Chief Executive Officer
(Principal Executive Officer)
By Michael W. Southern
Vice President, Secretary, Treasurer and Chief Financial Officer
(Principal Financial and Accounting Officer)
By /s/ Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: August 12, 1996
- --------------------------------------------------------------------------------
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 and Chief Executive Officer
(Principal Executive Officer)
By Kirby R. Willis
Vice President, Treasurer and Chief Financial Officer
(Principal Financial and Accounting Officer)
By /s/ Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: August 12, 1996
68
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the Form
10-Q for June 30, 1996, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 23,085,272
<OTHER-PROPERTY-AND-INVEST> 1,305,465
<TOTAL-CURRENT-ASSETS> 3,366,014
<TOTAL-DEFERRED-CHARGES> 2,584,109
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 30,340,860
<COMMON> 3,368,245
<CAPITAL-SURPLUS-PAID-IN> 1,987,058
<RETAINED-EARNINGS> 3,580,409
<TOTAL-COMMON-STOCKHOLDERS-EQ> 8,935,712
197,000
1,257,203
<LONG-TERM-DEBT-NET> 7,066,323
<SHORT-TERM-NOTES> 1,361,084
<LONG-TERM-NOTES-PAYABLE> 262,649
<COMMERCIAL-PAPER-OBLIGATIONS> 1,228,778
<LONG-TERM-DEBT-CURRENT-PORT> 184,948
75,000
<CAPITAL-LEASE-OBLIGATIONS> 149,427
<LEASES-CURRENT> 2,816
<OTHER-ITEMS-CAPITAL-AND-LIAB> 9,619,920
<TOT-CAPITALIZATION-AND-LIAB> 30,340,860
<GROSS-OPERATING-REVENUE> 4,954,186
<INCOME-TAX-EXPENSE> 384,828
<OTHER-OPERATING-EXPENSES> 3,683,495
<TOTAL-OPERATING-EXPENSES> 4,068,323
<OPERATING-INCOME-LOSS> 885,863
<OTHER-INCOME-NET> 52,394
<INCOME-BEFORE-INTEREST-EXPEN> 938,257
<TOTAL-INTEREST-EXPENSE> 374,922
<NET-INCOME> 563,335
43,200
<EARNINGS-AVAILABLE-FOR-COMM> 520,135
<COMMON-STOCK-DIVIDENDS> 422,353
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 889,165
<EPS-PRIMARY> 0.78
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the Form
10-Q for June 30, 1996, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 7,073,175
<OTHER-PROPERTY-AND-INVEST> 171,767
<TOTAL-CURRENT-ASSETS> 938,121
<TOTAL-DEFERRED-CHARGES> 651,149
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 8,834,212
<COMMON> 224,358
<CAPITAL-SURPLUS-PAID-IN> 1,304,791
<RETAINED-EARNINGS> 1,177,780
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,706,929
97,000
440,400
<LONG-TERM-DEBT-NET> 2,365,509
<SHORT-TERM-NOTES> 15,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 460,033
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 7,551
<LEASES-CURRENT> 930
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,740,860
<TOT-CAPITALIZATION-AND-LIAB> 8,834,212
<GROSS-OPERATING-REVENUE> 1,512,396
<INCOME-TAX-EXPENSE> 100,672
<OTHER-OPERATING-EXPENSES> 1,117,999
<TOTAL-OPERATING-EXPENSES> 1,218,671
<OPERATING-INCOME-LOSS> 293,725
<OTHER-INCOME-NET> 8,835
<INCOME-BEFORE-INTEREST-EXPEN> 302,560
<TOTAL-INTEREST-EXPENSE> 120,386
<NET-INCOME> 182,174
13,237
<EARNINGS-AVAILABLE-FOR-COMM> 168,937
<COMMON-STOCK-DIVIDENDS> 152,400
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 331,338
<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 June 30, 1996, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 10,449,611
<OTHER-PROPERTY-AND-INVEST> 292,811
<TOTAL-CURRENT-ASSETS> 1,196,320
<TOTAL-DEFERRED-CHARGES> 1,475,390
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 13,414,132
<COMMON> 344,250
<CAPITAL-SURPLUS-PAID-IN> 2,384,857
<RETAINED-EARNINGS> 1,594,995
<TOTAL-COMMON-STOCKHOLDERS-EQ> 4,324,102
100,000
617,787
<LONG-TERM-DEBT-NET> 3,224,288
<SHORT-TERM-NOTES> 217,150
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 223,917
<LONG-TERM-DEBT-CURRENT-PORT> 59,385
75,000
<CAPITAL-LEASE-OBLIGATIONS> 86,906
<LEASES-CURRENT> 351
<OTHER-ITEMS-CAPITAL-AND-LIAB> 4,485,246
<TOT-CAPITALIZATION-AND-LIAB> 13,414,132
<GROSS-OPERATING-REVENUE> 2,162,985
<INCOME-TAX-EXPENSE> 205,239
<OTHER-OPERATING-EXPENSES> 1,532,815
<TOTAL-OPERATING-EXPENSES> 1,738,054
<OPERATING-INCOME-LOSS> 424,931
<OTHER-INCOME-NET> (1,754)
<INCOME-BEFORE-INTEREST-EXPEN> 423,177
<TOTAL-INTEREST-EXPENSE> 130,996
<NET-INCOME> 292,181
23,491
<EARNINGS-AVAILABLE-FOR-COMM> 268,690
<COMMON-STOCK-DIVIDENDS> 243,600
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 657,551
<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 June 30, 1996, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,071,622
<OTHER-PROPERTY-AND-INVEST> 655
<TOTAL-CURRENT-ASSETS> 184,595
<TOTAL-DEFERRED-CHARGES> 90,339
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,347,211
<COMMON> 38,060
<CAPITAL-SURPLUS-PAID-IN> 218,519
<RETAINED-EARNINGS> 178,772
<TOTAL-COMMON-STOCKHOLDERS-EQ> 435,351
0
89,602
<LONG-TERM-DEBT-NET> 345,985
<SHORT-TERM-NOTES> 64,500
<LONG-TERM-NOTES-PAYABLE> 16,430
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 15,528
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 379,815
<TOT-CAPITALIZATION-AND-LIAB> 1,347,211
<GROSS-OPERATING-REVENUE> 308,742
<INCOME-TAX-EXPENSE> 15,512
<OTHER-OPERATING-EXPENSES> 251,464
<TOTAL-OPERATING-EXPENSES> 266,976
<OPERATING-INCOME-LOSS> 41,766
<OTHER-INCOME-NET> (63)
<INCOME-BEFORE-INTEREST-EXPEN> 41,703
<TOTAL-INTEREST-EXPENSE> 15,003
<NET-INCOME> 26,700
2,861
<EARNINGS-AVAILABLE-FOR-COMM> 23,839
<COMMON-STOCK-DIVIDENDS> 24,700
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 63,093
<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 June 30, 1996, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 982,356
<OTHER-PROPERTY-AND-INVEST> 3,108
<TOTAL-CURRENT-ASSETS> 108,447
<TOTAL-DEFERRED-CHARGES> 57,641
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,151,552
<COMMON> 37,691
<CAPITAL-SURPLUS-PAID-IN> 179,761
<RETAINED-EARNINGS> 159,254
<TOTAL-COMMON-STOCKHOLDERS-EQ> 376,706
0
74,414
<LONG-TERM-DEBT-NET> 246,235
<SHORT-TERM-NOTES> 55,000
<LONG-TERM-NOTES-PAYABLE> 30,000
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 35,010
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 334,187
<TOT-CAPITALIZATION-AND-LIAB> 1,151,552
<GROSS-OPERATING-REVENUE> 263,703
<INCOME-TAX-EXPENSE> 14,093
<OTHER-OPERATING-EXPENSES> 213,845
<TOTAL-OPERATING-EXPENSES> 227,938
<OPERATING-INCOME-LOSS> 35,765
<OTHER-INCOME-NET> 2,011
<INCOME-BEFORE-INTEREST-EXPEN> 37,776
<TOTAL-INTEREST-EXPENSE> 12,232
<NET-INCOME> 25,544
2,449
<EARNINGS-AVAILABLE-FOR-COMM> 23,095
<COMMON-STOCK-DIVIDENDS> 21,300
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 26,630
<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 June 30, 1996, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 444,525
<OTHER-PROPERTY-AND-INVEST> 1,787
<TOTAL-CURRENT-ASSETS> 79,419
<TOTAL-DEFERRED-CHARGES> 39,205
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 564,936
<COMMON> 54,223
<CAPITAL-SURPLUS-PAID-IN> 8,688
<RETAINED-EARNINGS> 102,915
<TOTAL-COMMON-STOCKHOLDERS-EQ> 165,826
0
35,000
<LONG-TERM-DEBT-NET> 124,974
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 30,000
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 28,200
0
<CAPITAL-LEASE-OBLIGATIONS> 6,740
<LEASES-CURRENT> 599
<OTHER-ITEMS-CAPITAL-AND-LIAB> 173,597
<TOT-CAPITALIZATION-AND-LIAB> 564,936
<GROSS-OPERATING-REVENUE> 112,481
<INCOME-TAX-EXPENSE> 6,583
<OTHER-OPERATING-EXPENSES> 89,550
<TOTAL-OPERATING-EXPENSES> 96,133
<OPERATING-INCOME-LOSS> 16,348
<OTHER-INCOME-NET> (199)
<INCOME-BEFORE-INTEREST-EXPEN> 16,149
<TOTAL-INTEREST-EXPENSE> 6,388
<NET-INCOME> 9,761
1,162
<EARNINGS-AVAILABLE-FOR-COMM> 8,599
<COMMON-STOCK-DIVIDENDS> 9,600
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 15,973
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
