Southern Company(US:SO)2024-10-30 22:17PART I—FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for The Southern Company and its subsidiary registrants for the periods ended September 30, 2024, including income, comprehensive income, cash flows, balance sheets, and stockholders' equity The Southern Company and Subsidiary Companies Financial Statements The Southern Company reported consolidated net income of $1,535 million for Q3 2024 and $3,867 million year-to-date, driven by higher retail electric revenues and increased total assets to $143,956 million The Southern Company - Condensed Consolidated Statements of Income | Financial Metric | Three Months Ended Sep 30, 2024 (in millions) | Three Months Ended Sep 30, 2023 (in millions) | Nine Months Ended Sep 30, 2024 (in millions) | Nine Months Ended Sep 30, 2023 (in millions) | | :--- | :--- | :--- | :--- | :--- | | Total Operating Revenues | $7,274 | $6,980 | $20,383 | $19,208 | | Operating Income | $2,368 | $2,110 | $6,010 | $4,619 | | Consolidated Net Income Attributable to Southern Company | $1,535 | $1,422 | $3,867 | $3,121 | | Diluted Earnings Per Share | $1.39 | $1.29 | $3.51 | $2.84 | The Southern Company - Condensed Consolidated Balance Sheet Highlights | Balance Sheet Item | As of Sep 30, 2024 (in millions) | As of Dec 31, 2023 (in millions) | | :--- | :--- | :--- | | Total Current Assets | $11,040 | $10,432 | | Total Property, Plant, and Equipment | $102,897 | $99,844 | | Total Assets | $143,956 | $139,331 | | Total Current Liabilities | $12,165 | $13,467 | | Long-term Debt | $61,254 | $57,210 | | Total Liabilities | $107,051 | $104,106 | | Total Stockholders' Equity | $36,905 | $35,225 | The Southern Company - Condensed Consolidated Cash Flows | Cash Flow Item | Nine Months Ended Sep 30, 2024 (in millions) | Nine Months Ended Sep 30, 2023 (in millions) | | :--- | :--- | :--- | | Net Cash Provided from Operating Activities | $7,615 | $5,740 | | Net Cash Used for Investing Activities | $(6,678) | $(6,721) | | Net Cash Provided from (Used for) Financing Activities | $(803) | $834 | | Net Change in Cash | $134 | $(147) | Combined Notes to the Condensed Financial Statements Notes detail regulatory matters, contingencies, and financing, including updates on Plant Vogtle, rate cases, environmental costs, and an Alabama Power impairment loss - In Q3 2024, Alabama Power recorded a pre-tax impairment loss of $36 million ($27 million after-tax) after discontinuing the development of a multi-use commercial facility. This loss is reflected in other operations and maintenance expenses103 - Georgia Power placed Plant Vogtle Unit 4 in service on April 29, 2024. Following this, the remaining cost estimate was reduced by $21 million, resulting in a pre-tax credit to income. The total project capital cost forecast for Georgia Power's share is $10.73 billion140141 - During September 2024, Hurricane Helene caused significant damage to Georgia Power's facilities, resulting in an estimated $1.1 billion in deferred restoration costs, which are recorded as a regulatory asset138 - In May 2024, Southern Company issued $1.5 billion of 4.50% Convertible Senior Notes due 2027. The notes are convertible at a rate equivalent to approximately $92.45 per share216222 Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the financial condition and results of operations for The Southern Company and its subsidiaries, detailing performance drivers, future earnings potential, liquidity, capital requirements, and critical accounting policies Southern Company Results of Operations Southern Company's consolidated net income increased to $1,535 million in Q3 2024 and $3,867 million year-to-date, driven by higher retail electric revenues from rate changes and Plant Vogtle inclusion, partially offset by increased expenses Southern Company Net Income (Attributable to Southern Company) | Period | 2024 (in millions) | 2023 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Third Quarter | $1,535 | $1,422 | 7.9% | | Year-To-Date | $3,867 | $3,121 | 23.9% | Drivers of Change in Retail Electric Revenues (YTD 2024 vs YTD 2023) | Driver | Change (in millions) | % Change | | :--- | :--- | :--- | | Rates and pricing | $1,051 | 8.3% | | Sales growth | $24 | 0.2% | | Weather | $279 | 2.2% | | Fuel and other cost recovery | $(158) | (1.2)% | | Total Retail Electric Revenues | $1,196 | 9.5% | - The primary drivers for increased retail revenues were the inclusion of Plant Vogtle Units 3 and 4 in retail rates at Georgia Power and base tariff increases under its 2022 ARP342 - Operating expenses increased, with O&M up $191 million year-to-date due to Plant Vogtle operations and an impairment loss at Alabama Power. Depreciation rose by $172 million due to new assets in service374376 Future Earnings Potential Future earnings depend on regulatory environments, cost recovery, and demand growth from data centers, while facing risks from inflation, interest rates, and policy changes affecting gas operations - Key growth drivers for the electricity business include the increasing digitization of the economy, growth in data centers, and electrification of transportation540 - The EPA's final GHG rules for power plants, published in May 2024, may result in significant compliance costs, though the ultimate impact is currently undetermined pending legal challenges560 - The Inflation Reduction Act may provide Production Tax Credits (PTCs) for Alabama Power and Georgia Power's nuclear facilities starting in 2024 and could subject the company to a 15% Corporate Alternative Minimum Tax (CAMT)570571 - SNG, a joint venture of Southern Company Gas, is developing a ~$3 billion pipeline project expected to be completed in 2028, which will increase capacity by approximately 1.2 billion cubic feet per day567 Financial Condition and Liquidity The company's financial condition remained stable, with capital needs met by operating cash flows, debt, and equity, maintaining $7.9 billion in unused credit and experiencing a $3.2 billion increase in long-term debt - As of September 30, 2024, The Southern Company and its subsidiaries had $7.9 billion in unused committed credit arrangements with banks, providing significant liquidity597 - Significant balance sheet changes in 2024 include a $3.2 billion increase in long-term debt, a $3.1 billion increase in PP&E, and a $1.6 billion decrease in notes payable (commercial paper)616 - Credit rating agencies S&P, Fitch, and Moody's upgraded the credit ratings for Southern Company and/or certain subsidiaries during 2024, reflecting improved financial standing following the completion of Plant Vogtle646647648 Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes to its market risk disclosures for the nine months ended September 30, 2024, continuing to manage commodity price, interest rate, weather, and foreign currency risks through hedging - There were no material changes to the company's market risk disclosures from those previously reported in the Form 10-K650 Controls and Procedures Management, including the CEO and CFO of each registrant, concluded that disclosure controls and procedures were effective as of September 30, 2024, with no material changes to internal control over financial reporting during Q3 2024 - The Chief Executive Officer and Chief Financial Officer of each registrant concluded that disclosure controls and procedures were effective as of September 30, 2024652 - No changes in internal control over financial reporting occurred during Q3 2024 that have materially affected, or are reasonably likely to materially affect, the company's internal controls653 PART II—OTHER INFORMATION Legal Proceedings This section refers to the Notes to the Condensed Financial Statements for information regarding legal and administrative proceedings, with a disclosure threshold of $1 million for material environmental legal proceedings - Information regarding legal proceedings is detailed in the Notes to the Condensed Financial Statements. The company's disclosure threshold for environmental legal proceedings with potential monetary sanctions is $1 million655 Risk Factors The company states that there have been no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K - There have been no material changes to the risk factors disclosed in the company's Form 10-K656 Other Information This section discloses the adoption of Rule 10b5-1 trading arrangements by company directors and officers during the third quarter of 2024, with three executives adopting new trading plans for Southern Company common stock Adoption of Trading Arrangements by Officers (Q3 2024) | Name | Title | Date of Adoption | Expiration Date | Aggregate Shares Covered | | :--- | :--- | :--- | :--- | :--- | | Martin B. Davis | Executive Vice President | Aug 6, 2024 | Dec 31, 2025 | 8,000 | | J. Jeffrey Peoples | Chairman, President, and CEO of Alabama Power | Sep 5, 2024 | Dec 31, 2025 | 15,625 | | Christopher C. Womack | Chairman, President, and CEO | Sep 5, 2024 | Dec 31, 2025 | 40,000 | Exhibits This section lists the exhibits filed with the Form 10-Q, including supplemental indentures for debt issuances, powers of attorney, and CEO/CFO certifications required under the Sarbanes-Oxley Act - Exhibits filed include supplemental indentures for new debt, CEO/CFO certifications (Sections 302 and 906), and Interactive Data Files (Inline XBRL)659660661