SO Southern Co

Non-GAAP Financial Measures

Three Months Ended June

Year-to-Date June

Net Income - Excluding Items (in millions)

2017

2016

2017

2016

Net Income (Loss) - As Reported

$(1,381)

$623

$(723)

$1,112

Estimated Loss on Kemper IGCC

3,012

81

3,120

134

  Tax Impact

(896)

(31)

(937)

(51)

Loss on Plant Scherer Unit 3

-

-

33

-

  Tax Impact

-

-

(13)

-

Acquisition and Integration Costs

9

44

13

65

       Tax Impact

(4)

(13)

(5)

(20)

Wholesale Gas Services

28

-

(86)

-

       Tax Impact

(11)

-

35

-

Earnings Guidance Comparability Item:

Equity Return Related to Kemper IGCC

    Schedule Extension

(24)

-

(47)

-

       Tax Impact

(5)

-

(9)

-

Net Income – Excluding Items

$728

$704

$1,381

$1,240

       Average Shares Outstanding – (in millions)                                 

998

934

996

925

Basic Earnings Per Share – Excluding Items

$0.73

$0.75

$1.39

$1.34

Southern Company

Financial Highlights

(In Millions of Dollars Except Earnings Per Share)

Three Months Ended
June

Year-to-Date
June

Net Income (Loss)–As Reported (See Notes)

2017

2016

2017

2016

Traditional Electric Operating Companies

$

(1,442)

$

599

$

(1,010)

$

1,064

Southern Power

82

89

151

139

Southern Company Gas¹

49

—

288

—

Total

(1,311)

688

(571)

1,203

Parent Company and Other

(70)

(65)

(152)

(91)

Net Income (Loss)–As Reported

$

(1,381)

$

623

$

(723)

$

1,112

Basic Earnings (Loss) Per Share²

$

(1.38)

$

0.67

$

(0.73)

$

1.20

Average Shares Outstanding (in millions)

998

934

996

925

End of Period Shares Outstanding (in millions)

999

942

Non-GAAP Financial Measures

Three Months Ended
June

Year-to-Date
June

Net Income–Excluding Items (See Notes)

2017

2016

2017

2016

 Net Income (Loss)–As Reported

$

(1,381)

$

623

$

(723)

$

1,112

Estimated Loss on Kemper IGCC³

3,012

81

3,120

134

Tax Impact

(896)

(31)

(937)

(51)

Loss on Plant Scherer Unit 3⁴

—

—

33

—

Tax Impact

—

—

(13)

—

Acquisition and Integration Costs⁵

9

44

13

65

Tax Impact

(4)

(13)

(5)

(20)

Wholesale Gas Services⁶

28

—

(86)

—

Tax Impact

(11)

—

35

—

Earnings Guidance Comparability Item:

Equity Return Related to Kemper IGCC

   Schedule Extension⁷

(24)

—

(47)

—

Tax Impact

(5)

—

(9)

—

  Net Income–Excluding Items

$

728

$

704

$

1,381

$

1,240

  Basic Earnings Per Share–Excluding Items

$

0.73

$

0.75

$

1.39

$

1.34

- See Notes on the following page.

Southern Company

Financial Highlights

Notes

- In connection with the adoption in the fourth quarter 2016 of a new accounting standard for stock compensation, previously reported amounts for income tax expense were reduced by a total of $11.3 million and $15.8 million for the three and six months ended June 30, 2016, respectively.

- For comparative purposes, Net Income - Excluding Items and Basic Earnings Per Share - Excluding Items in prior year periods do not reflect any adjustments to exclude acquisition debt financing costs ($0.03 per share for the three and six months ended June 30, 2016) related to the acquisition of Southern Company Gas. This item was not contemplated in Southern Company's February 2016 guidance and was excluded in the previously reported periods through December 31, 2016.

(1) On July 1, 2016, Southern Company completed the acquisition of Southern Company Gas.

(2) For the three and six months ended June 30, 2017 and 2016, dilution does not change basic earnings per share by more than 1 cent and is not material.

(3) Earnings for the three and six months ended June 30, 2017 and 2016 include the estimated losses relating to Mississippi Power Company's integrated coal gasification combined cycle facility construction project in Kemper County, Mississippi (Kemper IGCC) which significantly impacted the presentation of earnings and earnings per share. Further charges of uncertain amounts may occur in future periods in connection with the resolution of the Mississippi Public Service Commission's Kemper Settlement Docket.

(4) Earnings for the six months ended June 30, 2017 include a $32.5 million write-down ($20 million after tax) of Gulf Power Company's ownership of Plant Scherer Unit 3 as a result of the retail rate case settlement approved by the Florida Public Service Commission on April 4, 2017. Further charges are not expected to occur.

(5) Earnings for the three and six months ended June 30, 2017 and 2016 include costs related to the acquisition and integration of Southern Company Gas. Further costs are expected to continue to occur in connection with the related integration activities; however, the amount and duration of such expenditures is uncertain.

(6) Earnings for the three and six months ended June 30, 2017 include the Wholesale Gas Services business of Southern Company Gas. Presenting earnings and earnings per share excluding Wholesale Gas Services provides investors with an additional measure of operating performance that excludes the volatility resulting from mark-to-market and lower of weighted average cost or current market price accounting adjustments.

(7) Earnings for the three and six months ended June 30, 2017 include additional allowance for funds used during construction (AFUDC) equity as a result of extending the schedule for the Kemper IGCC construction project. AFUDC equity ceased as of the project's suspension in June 2017. Southern Company's 2017 earnings guidance, initially presented in October 2016 assumed construction would be complete and AFUDC equity would cease by November 30, 2016. As a result, Southern Company believes presentation of earnings per share excluding these amounts provides investors with information comparable to the 2017 guidance. Management also uses such measures to evaluate Southern Company's performance in 2017.

Southern Company

Significant Factors Impacting EPS

Three Months Ended
June

Year-to-Date
June

2017

2016

Change

2017

2016

Change

Earnings (Loss) Per Share–

As Reported¹ (See Notes)

$

(1.38)

$

0.67

$

(2.05)

$

(0.73)

$

1.20

$

(1.93)

 Significant Factors:

 Traditional Electric Operating Companies

$

(2.18)

$

(2.24)

Southern Power

(0.01)

0.01

Southern Company Gas²

0.05

0.31

Parent Company and Other

—

(0.07)

Increase in Shares³

0.09

0.06

 Total–As Reported

$

(2.05)

$

(1.93)

Three Months Ended
June

Year-to-Date
June

Non-GAAP Financial Measures

2017

2016

Change

2017

2016

Change

Earnings Per Share–

Excluding Items (See Notes)

$

0.73

$

0.75

$

(0.02)

$

1.39

$

1.34

$

0.05

  Total–As Reported

$

(2.05)

$

(1.93)

Kemper IGCC Impacts⁴

2.04

2.05

Loss on Plant Scherer Unit 3⁵

—

0.02

Acquisition and Integration Costs⁶

(0.03)

(0.04)

Wholesale Gas Services⁷

0.02

(0.05)

  Total–Excluding Items

$

(0.02)

$

0.05

- See Notes on the following page.

Southern Company

Significant Factors Impacting EPS

Notes

- In connection with the adoption in the fourth quarter 2016 of a new accounting standard for stock compensation, previously reported amounts for income tax expense were reduced by a total of $11.3 million and $15.8 million for the three and six months ended June 30, 2016, respectively.

- For comparative purposes, Basic Earnings Per Share - Excluding Items in prior year periods does not reflect any adjustments to exclude acquisition debt financing costs ($0.03 per share for the three and six months ended June 30, 2016) related to the acquisition of Southern Company Gas. This item was not contemplated in Southern Company's February 2016 guidance and was excluded in the previously reported periods through December 31, 2016.

(1) For the three and six months ended June 30, 2017 and 2016, dilution does not change basic earnings per share by more than 1 cent and is not material.

(2) On July 1, 2016, Southern Company completed the acquisition of Southern Company Gas.

(3) Per share changes for each of the business segments reported in this table are calculated based on average shares outstanding as of June 30, 2016. The per share change attributable to Increase in Shares reflects the impact of the increase in average shares outstanding from June 30, 2016 through June 30, 2017. Because Southern Company reported a net loss for the three and six month periods ended June 30, 2017, the dilutive impact of the increase of average shares outstanding for these periods served to reduce the net loss per share.

(4) Earnings for the three and six months ended June 30, 2017 and 2016 include the estimated losses relating to Mississippi Power Company's integrated coal gasification combined cycle facility construction project in Kemper County, Mississippi (Kemper IGCC) which significantly impacted the presentation of earnings and earnings per share. Further charges of uncertain amounts may occur in future periods in connection with the resolution of the Mississippi Public Service Commission's Kemper Settlement Docket.

Earnings for the three and six months ended June 30, 2017 also include additional allowance for funds used during construction (AFUDC) equity as a result of extending the schedule for the Kemper IGCC construction project. AFUDC equity ceased as of the project's suspension in June 2017. Southern Company's 2017 earnings guidance, initially presented in October 2016 assumed construction would be complete and AFUDC equity would cease by November 30, 2016. As a result, Southern Company believes presentation of earnings per share excluding these amounts provides investors with information comparable to the 2017 guidance. Management also uses such measures to evaluate Southern Company's performance in 2017.

(5) Earnings for the six months ended June 30, 2017 include a $32.5 million write-down ($20 million after tax) of Gulf Power Company's ownership of Plant Scherer Unit 3 as a result of the retail rate case settlement approved by the Florida Public Service Commission on April 4, 2017. Further charges are not expected to occur.

(6) Earnings for the three and six months ended June 30, 2017 and 2016 include costs related to the acquisition and integration of Southern Company Gas. Further costs are expected to continue to occur in connection with the related integration activities; however, the amount and duration of such expenditures is uncertain.

(7) Earnings for the three and six months ended June 30, 2017 include the Wholesale Gas Services business of Southern Company Gas. Presenting earnings and earnings per share excluding Wholesale Gas Services provides investors with an additional measure of operating performance that excludes volatility resulting from mark-to-market and lower of weighted average cost or current market price accounting adjustments.

Southern Company

EPS Earnings Analysis

Three Months Ended June 2017 vs. June 2016

Description

$(0.01)

Retail Sales

0.05

Retail Revenue Impacts

(0.03)

Weather

(0.01)

Wholesale Operations

0.01

Non-Fuel O&M

(0.01)

Other Income and Deductions

(0.01)

Interest Expense

0.01

Income Taxes

Total Traditional Electric Operating Companies

(0.01)

Southern Power

0.07

Southern Company Gas¹

(0.03)

Parent and Other

(0.05)

Increase in Shares

$(0.02)

Total Change in EPS (Excluding Items)

(2.04)

Kemper IGCC Impacts²

0.03

Acquisition and Integration Costs³

(0.02)

Wholesale Gas Services⁴

$(2.05)

Total Change in EPS (As Reported)

- See Notes on the following page.

Southern Company

EPS Earnings Analysis

Three Months Ended June 2017 vs. June 2016

Notes

- In connection with the adoption in the fourth quarter 2016 of a new accounting standard for stock compensation, previously reported amounts for income tax expense were reduced by a total of $11.3 million for the three months ended June 30, 2016.

- For comparative purposes, Basic Earnings Per Share - Excluding Items in the prior year period does not reflect any adjustments to exclude acquisition debt financing costs ($0.03 per share for the three months ended June 30, 2016) related to the acquisition of Southern Company Gas. This item was not contemplated in Southern Company's February 2016 guidance and was excluded in the previously reported periods through December 31, 2016.

(1) On July 1, 2016, Southern Company completed the acquisition of Southern Company Gas.

(2) Earnings for the three months ended June 30, 2017 and 2016 include the estimated losses relating to Mississippi Power Company's integrated coal gasification combined cycle facility construction project in Kemper County, Mississippi (Kemper IGCC) which significantly impacted the presentation of earnings and earnings per share. Further charges of uncertain amounts may occur in future periods in connection with the resolution of the Mississippi Public Service Commission's Kemper Settlement Docket.

Earnings for the three months ended June 30, 2017 also include additional allowance for funds used during construction (AFUDC) equity as a result of extending the schedule for the Kemper IGCC construction project. AFUDC equity ceased as of the project's suspension in June 2017. Southern Company's 2017 earnings guidance, initially presented in October 2016 assumed construction would be complete and AFUDC equity would cease by November 30, 2016. As a result, Southern Company believes presentation of earnings per share excluding these amounts provides investors with information comparable to the 2017 guidance. Management also uses such measures to evaluate Southern Company's performance in 2017.

(3) Earnings for the three months ended June 30, 2017 and 2016 include costs related to the acquisition and integration of Southern Company Gas. Further costs are expected to continue to occur in connection with the related integration activities; however, the amount and duration of such expenditures is uncertain.

(4) Earnings for the three months ended June 30, 2017 include the Wholesale Gas Services business of Southern Company Gas in future periods. Presenting earnings and earnings per share excluding Wholesale Gas Services provides investors with an additional measure of operating performance that excludes the volatility resulting from mark-to-market and lower of weighted average cost or current market price accounting adjustments.

Southern Company

Consolidated Earnings As Reported

(In Millions of Dollars)

Three Months Ended June

Year-to-Date June

2017

2016

Change

2017

2016

Change

Income Account-

Retail Electric Revenues-

Fuel

$

1,016

$

998

$

18

$

1,944

$

1,873

$

71

Non-Fuel

2,761

2,750

11

5,227

5,251

(24)

Wholesale Electric Revenues

618

446

172

1,149

842

307

Other Electric Revenues

167

166

1

342

348

(6)

Natural Gas Revenues

684

—

684

2,214

—

2,214

Other Revenues

184

99

85

326

137

189

Total Revenues

5,430

4,459

971

11,202

8,451

2,751

Fuel and Purchased Power

1,303

1,212

91

2,478

2,288

190

Cost of Natural Gas

232

—

232

951

—

951

Cost of Other Sales

114

58

56

203

77

126

Non-Fuel O & M

1,301

1,099

202

2,631

2,206

425

Depreciation and Amortization

754

569

185

1,469

1,110

359

Taxes Other Than Income Taxes

308

255

53

638

511

127

Estimated Loss on Kemper IGCC

3,012

81

2,931

3,120

134

2,986

Total Operating Expenses

7,024

3,274

3,750

11,490

6,326

5,164

Operating Income

(1,594)

1,185

(2,779)

(288)

2,125

(2,413)

Allowance for Equity Funds Used During Construction

58

45

13

115

98

17

Earnings from Equity Method Investments

28

(1)

29

67

(1)

68

Interest Expense, Net of Amounts Capitalized

424

293

131

840

539

301

Other Income (Expense), net

(3)

(28)

25

(11)

(56)

45

Income Taxes

(587)

261

(848)

(273)

479

(752)

Net Income (Loss)

(1,348)

647

(1,995)

(684)

1,148

(1,832)

Less:

Dividends on Preferred and Preference Stock of Subsidiaries

11

12

(1)

22

23

(1)

Net Income (Loss) Attributable to Noncontrolling Interests

22

12

10

17

13

4

NET INCOME (LOSS) ATTRIBUTABLE TO SOUTHERN COMPANY

$

(1,381)

$

623

$

(2,004)

$

(723)

$

1,112

$

(1,835)

Notes

- Certain prior year data may have been reclassified to conform with current year presentation.

- In connection with the adoption in the fourth quarter 2016 of a new accounting standard for stock compensation, previously reported amounts for income tax expense were reduced by a total of $11.3 million and $15.8 million for the three and six months ended June 30, 2016, respectively.

Southern Company

Kilowatt-Hour Sales and Customers

(In Millions of KWHs)

Three Months Ended June

Year-to-Date June

2017

2016

Change

Weather Adjusted Change

2017

2016

Change

Weather Adjusted Change

Kilowatt-Hour Sales-

Total Sales

50,665

47,572

6.5

%

96,358

93,048

3.6

%

Total Retail Sales-

38,849

39,426

(1.5)

%

(0.4)

%

74,353

77,465

(4.0)

%

(0.8)

%

Residential

12,087

12,443

(2.9)

%

(0.4)

%

23,003

25,045

(8.2)

%

0.2

%

Commercial

13,271

13,381

(0.8)

%

—

%

25,038

25,704

(2.6)

%

(0.9)

%

Industrial

13,280

13,382

(0.8)

%

(0.8)

%

25,886

26,270

(1.5)

%

(1.5)

%

Other

211

220

(4.2)

%

(4.0)

%

426

446

(4.6)

%

(4.4)

%

Total Wholesale Sales

11,816

8,146

45.1

%

N/A

22,005

15,583

41.2

%

N/A

(In Thousands of Customers)

Period Ended June

2017

2016¹

Change

Regulated Utility Customers-

Total Utility Customers-

9,194

9,119

0.8

%

Total Traditional Electric

4,621

4,575

1.0

%

Southern Company Gas

4,573

4,544

0.6

%

Notes

(1) Southern Company's acquisition of Southern Company Gas was completed on July 1, 2016. June 2016 customers are shown on a pro forma basis for comparative purposes.

Southern Company

Financial Overview As Reported

(In Millions of Dollars)

Three Months Ended June

Year-to-Date June

2017

2016

% Change

2017

2016

% Change

Southern Company –

Operating Revenues

$

5,430

$

4,459

21.8

%

$

11,202

$

8,451

32.6

%

Earnings (Loss) Before Income Taxes

(1,935)

908

N/M

(957)

1,627

N/M

Net Income (Loss) Available to Common

(1,381)

623

N/M

(723)

1,112

N/M

Alabama Power –

Operating Revenues

$

1,484

$

1,444

2.8

%

$

2,866

$

2,776

3.2

%

Earnings Before Income Taxes

386

358

7.8

%

689

621

11.0

%

Net Income Available to Common

230

213

8.0

%

403

370

8.9

%

Georgia Power –

Operating Revenues

$

2,048

$

2,051

(0.1)

%

$

3,880

$

3,923

(1.1)

%

Earnings Before Income Taxes

551

565

(2.5)

%

971

998

(2.7)

%

Net Income Available to Common

347

349

(0.6)

%

607

618

(1.8)

%

Gulf Power –

Operating Revenues

$

357

$

365

(2.2)

%

$

707

$

700

1.0

%

Earnings Before Income Taxes

61

61

—

%

95

112

(15.2)

%

Net Income Available to Common

35

34

2.9

%

53

63

(15.9)

%

Mississippi Power –

Operating Revenues

$

303

$

277

9.4

%

$

575

$

533

7.9

%

Earnings (Loss) Before Income Taxes

(2,934)

(14)

N/M

(2,981)

(13)

N/M

Net Income (Loss) Available to Common

(2,054)

2

N/M

(2,074)

13

N/M

Southern Power –

Operating Revenues

$

529

$

373

41.8

%

$

979

$

688

42.3

%

Earnings Before Income Taxes

66

60

10.0

%

78

87

(10.3)

%

Net Income Available to Common

82

89

(7.9)

%

151

139

8.6

%

Southern Company Gas¹ –

Operating Revenues

$

716

$

—

N/A

$

2,276

$

—

N/A

Earnings Before Income Taxes

80

—