Business Context and Reporting Period
This Form 8-K is a combined current report filed on July 27, 2016, by The Southern Company and its subsidiaries: Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, and Southern Power Company. The filing reports earnings results for the three-month and six-month periods ended June 30, 2016.
Key Financial Metrics
The filing references attached exhibits (99.01 through 99.07) containing specific data on revenue, profit, cash flow, margins, debt, and liquidity. The text of this Form 8-K does not provide specific numerical values for these metrics. Instead, it outlines the methodology for presenting earnings, including both GAAP and Non-GAAP measures.
- GAAP Earnings: Reported for the three-month and six-month periods ended June 30, 2016, and 2015.
- Non-GAAP Adjustments: Earnings and EPS are presented excluding specific charges to evaluate ongoing business activities.
Material Changes and Unusual Items
The filing highlights several significant items impacting financial results and comparisons:
- Kemper IGCC Project: Estimated probable losses related to Mississippi Power Company's construction of the integrated coal gasification combined cycle facility in Kemper County, Mississippi, significantly impacted earnings for the periods ended June 30, 2016, and 2015. Similar charges may occur with uncertain frequency in the future.
- Acquisition Costs: Costs related to the acquisitions of Southern Company Gas (formerly AGL Resources Inc.) and PowerSecure International, Inc. were excluded from Non-GAAP results for the 2016 periods. Further integration costs are expected to continue.
- Debt Financing Costs: Exhibit 99.02 excludes costs for debt financing related to the Southern Company Gas acquisition to align with 2016 earnings guidance.
- Discontinued Operations: 2015 Non-GAAP results excluded additional costs related to the discontinued operations of Mirant Corporation and the March 2009 settlement agreement with MC Asset Recovery, LLC (MCAR). No further MCAR costs are expected.
Guidance, Outlook, and Management Commentary
Management utilizes Non-GAAP earnings and EPS, excluding the aforementioned charges, to evaluate the performance of ongoing business activities. The company believes this presentation provides investors with useful information to assess performance, though it is not a substitute for GAAP measures. The filing notes that the 2016 earnings guidance presented in the first quarter of 2016 excluded the debt financing costs related to the Southern Company Gas acquisition.
Investor Verification Checklist
- Review Exhibit 99.01 (Press Release) for specific GAAP revenue, net income, and EPS figures for the three and six months ended June 30, 2016.
- Examine Exhibit 99.02 (Financial Highlights) for detailed Non-GAAP reconciliations and segment performance.
- Verify the magnitude of the Kemper IGCC loss charges in Exhibit 99.03 (Significant Factors Impacting EPS).
- Check Exhibit 99.06 for Kilowatt-Hour sales data to assess operational volume trends.
- Confirm the status of future integration costs related to Southern Company Gas and PowerSecure International in management commentary.