earningsrelease11508.htm

November 5, 2008

Media Contact: Cynthia Messina, Las Vegas, NV (702) 876-7132

Shareholder Contact: Ken Kenny, Las Vegas, NV (702) 876-7237

SWX-NYSE

For Immediate Release

SOUTHWEST GAS CORPORATION

REPORTS THIRD QUARTER RESULTS

Las Vegas – Southwest Gas Corporation recorded a net loss of $0.38 per share for the third quarter of 2008, compared to a loss of $0.22 per share recorded during the third quarter of 2007. Net loss for the third quarter of 2008 was $16.7 million, compared to a loss of $9.3 million in the prior-year quarter. Due to the seasonal nature of the business, net losses during the second and third quarters are normal and not generally indicative of earnings for a complete twelve-month period.

According to Jeffrey W. Shaw, Chief Executive Officer, “A significant component of the downturn in quarterly results was the negative return on long-term investments – a stock market-related, but non-operating, phenomenon. The current quarter reflects a $3.7 million decline in investment values while the prior-year quarter included a $355,000 increase in the value of investments underlying the cash surrender value of company-owned life insurance (“COLI”) policies. This change accounted for $0.09 per share of the decline between periods.” From an operations standpoint, Shaw noted that “Excluding COLI, operating results declined $3.3 million, or $0.07 per share, between periods, principally in the gas operations segment, as a modest increase in operating margin and lower financing costs were not sufficient to offset higher operating costs. The slowdown in the new construction market coupled with an increasing inventory of

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vacant existing homes has clearly impacted operating results.” Shaw concluded by saying, “We know we are in challenging economic times and there is no ‘quick fix’ available. However, many of our underlying fundamentals are strong and should allow us to ‘weather the storm.’ We have an improving capital structure, strong liquidity position, stable work force, moderate long-term cost increases, and general rate increase requests in Arizona and California which are nearing conclusion. As a result, we continue to believe we are positioned for future long-term improvements.”

For the twelve months ended September 30, 2008, consolidated net income was $72.9 million, or $1.69 per basic share, compared to $86.8 million, or $2.06 per basic share, during the twelve-month period ended September 30, 2007.

Natural Gas Operations Segment Results

Third Quarter

Operating margin, defined as operating revenues less the cost of gas sold, increased $1.5 million, or one percent, in the third quarter of 2008 compared to the third quarter of 2007. Customer growth contributed $1 million toward the operating margin increase as the Company added 19,000 net new customers during the last twelve months, an increase of one percent. Rate changes accounted for the remainder of the increase.

Operating expenses for the quarter increased $6.4 million, or five percent, compared to the third quarter of 2007 primarily due to general cost increases and incremental

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operating costs (including depreciation) associated with serving additional customers and facilities upgrades. Other income, which principally includes interest income, long-term investment returns, and non-utility expenses, decreased $5 million between periods. This was primarily due to a $4.1 million decline in returns on long-term investments between periods. Net financing costs decreased $1.5 million due principally to a reduction in outstanding debt.

Twelve Months to Date

Operating margin increased $10 million, or one percent, between periods. Customer growth accounted for $8 million of the increase and rate changes contributed $2 million. Warmer-than-normal temperatures were experienced during both twelve-month periods (each with estimated negative impacts to operating margin of approximately $7 million), resulting in no incremental impact between the periods.

Operating expenses increased $7.7 million, or one percent, between periods primarily due to general cost increases, partially offset by labor efficiencies resulting from the conversion to electronic meter reading.

Other income decreased $16.3 million between periods primarily due to a $10.8 million decrease in returns on long-term investments ($7.3 million loss in the current twelve-month period versus a $3.5 million gain in the prior-year period) and a $2.4 million reduction in interest income primarily due to the full recovery of previously deferred

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purchased gas cost receivables. Net financing costs between periods decreased $1.2 million, or one percent, due principally to lower average debt outstanding.

Southwest Gas Corporation provides natural gas service to approximately 1,819,000 customers in Arizona, Nevada, and California.

This press release may contain statements which constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (Reform Act). All such forward-looking statements are intended to be subject to the safe harbor protection provided by the Reform Act. A number of important factors affecting the business and financial results of the Company could cause actual results to differ materially from those stated in the forward-looking statements. These factors include, but are not limited to, the impact of weather variations on customer usage, customer growth rates, conditions in the housing market, the effects of regulation/deregulation, the timing and amount of rate relief, and changes in rate design.

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SOUTHWEST GAS CONSOLIDATED EARNINGS DIGEST

(In thousands, except per share amounts)

QUARTER ENDED SEPTEMBER 30,	2008		2007

Consolidated Operating Revenues	$	374,422	$	371,524

Net Loss	$	16,686	$	9,318

Average Number of Common Shares Outstanding		43,581		42,448

Loss Per Share	$	0.38	$	0.22

NINE MONTHS ENDED SEPTEMBER 30,	2008		2007

Consolidated Operating Revenues	$	1,635,333	$	1,591,777

Net Income	$	29,741	$	40,109

Average Number of Common Shares Outstanding		43,307		42,219

Basic Earnings Per Share	$	0.69	$	0.95

Diluted Earnings Per Share	$	0.68	$	0.94

TWELVE MONTHS ENDED SEPTEMBER 30,	2008		2007

Consolidated Operating Revenues	$	2,195,644	$	2,156,892

Net Income	$	72,878	$	86,816

Average Number of Common Shares Outstanding		43,150		42,060

Basic Earnings Per Share	$	1.69	$	2.06

Diluted Earnings Per Share	$	1.68	$	2.04

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SOUTHWEST GAS CORPORATION
SUMMARY UNAUDITED OPERATING RESULTS
(In thousands, except per share amounts)



	THREE MONTHS ENDED						NINE MONTHS ENDED					TWELVE MONTHS ENDED
	SEPTEMBER 30,						SEPTEMBER 30,					SEPTEMBER 30,
	2008			2007			2008			2007		2008			2007

Results of Consolidated Operations
Contribution to net income (loss) - gas operations	$	(19,678	)	$	(12,863	)	$	24,748		$	32,910	$	64,332		$	76,077
Contribution to net income - construction services		2,992			3,545			4,993			7,199		8,546			10,739
Net income (loss)	$	(16,686	)	$	(9,318	)	$	29,741		$	40,109	$	72,878		$	86,816

Basic earnings (loss) per share	$	(0.38	)	$	(0.22	)	$	0.69		$	0.95	$	1.69		$	2.06
Diluted earnings (loss) per share	$	(0.38	)	$	(0.22	)	$	0.68		$	0.94	$	1.68		$	2.04

Average outstanding common shares		43,581			42,448			43,307			42,219		43,150			42,060
Average shares outstanding (assuming dilution)		-			-			43,610			42,607		43,464			42,469




Results of Natural Gas Operations
Gas operating revenues	$	268,450		$	274,748		$	1,362,753		$	1,345,996	$	1,831,523		$	1,838,039
Net cost of gas sold		134,030			141,825			839,309			834,453		1,091,050			1,107,594
Operating margin		134,420			132,923			523,444			511,543		740,473			730,445
Operations and maintenance expense		87,489			83,222			256,298			250,847		336,659			336,934
Depreciation and amortization		41,623			39,774			123,565			117,380		163,275			155,022
Taxes other than income taxes		8,103			7,848			27,913			28,253		37,213			37,495
Operating income (loss)		(2,795	)		2,079			115,668			115,063		203,326			200,994
Other income (expense)		(4,548	)		478			(6,710	)		5,502		(7,362	)		8,984
Net interest deductions		20,521			22,003			62,811			64,466		84,781			86,018
Net interest deductions on subordinated debentures		1,933			1,932			5,797			5,795		7,729			7,726
Income (loss) before income taxes		(29,797	)		(21,378	)		40,350			50,304		103,454			116,234
Income tax expense (benefit)		(10,119	)		(8,515	)		15,602			17,394		39,122			40,157
Contribution to net income (loss) - gas operations	$	(19,678	)	$	(12,863	)	$	24,748		$	32,910	$	64,332		$	76,077

SOUTHWEST GAS CORPORATION
SELECTED STATISTICAL DATA
SEPTEMBER 30, 2008


FINANCIAL STATISTICS
Market value to book value per share at quarter end		131	%
Twelve months to date return on equity -- total company		7.3	%
-- gas segment		6.8	%
Common stock dividend yield at quarter end		3.0	%


GAS OPERATIONS SEGMENT
							Authorized
	Authorized			Authorized			Return on
	Rate Base			Rate of			Common
Rate Jurisdiction	(In thousands)			Return			Equity
Arizona	$	922,721			8.40	%		9.50	%
Southern Nevada		574,285			7.64			10.50
Northern Nevada		110,309			8.56			10.50
Southern California		102,703			8.74			10.38
Northern California		45,487			8.74			10.38
Paiute Pipeline Company (1)		82,853			9.44			11.80

(1) Estimated amounts based on rate case settlements.


SYSTEM THROUGHPUT BY CUSTOMER CLASS
	NINE MONTHS ENDED						TWELVE MONTHS ENDED
	SEPTEMBER 30,						SEPTEMBER 30,
(In dekatherms)	2008			2007			2008			2007
Residential		56,165,408			53,941,505			72,030,225			71,079,930
Small commercial		24,173,970			23,379,275			31,861,258			31,362,053
Large commercial		9,505,802			9,516,396			12,745,478			12,847,212
Industrial / Other		7,189,719			7,820,051			9,722,168			11,520,845
Transportation		89,208,081			89,318,349			112,731,940			119,677,198
Total system throughput		186,242,980			183,975,576			239,091,069			246,487,238


HEATING DEGREE DAY COMPARISON
Actual		1,446			1,362			1,933			1,868
Ten-year average		1,367			1,396			1,904			1,947

Heating degree days for prior periods have been recalculated using the current period customer mix.