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