EX-99 2 exhibit99.htm EARNINGS RELEASE 2ND QUARTER 2007

August 6, 2007

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 SECOND QUARTER RESULTS

 

Las Vegas – Southwest Gas Corporation recorded a net loss of $0.01 per basic share for the second quarter of 2007, compared to net income of $0.09 per basic share earned during the second quarter of 2006. The second quarter of 2006 results included a benefit of approximately $0.07 per share related to a nonrecurring property tax settlement. Net loss for the second quarter of 2007 was $337,000, compared to net income of $3.7 million in the prior period. 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, “Excluding the nonrecurring item, quarterly results declined slightly compared to the same period in 2006 primarily due to a decrease in contribution from our construction services segment, which had experienced record second quarter earnings in 2006.” Shaw also noted that “the torrid customer growth levels experienced in recent years have moderated. During the past twelve months, Southwest added 57,000 customers, an increase of three percent. We anticipate this more moderate growth level will continue throughout the second half of 2007.”

 

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For the twelve months ended June 30, 2007, consolidated net income was $85.4 million, or $2.05 per basic share, compared to $61.7 million, or $1.57 per basic share, during the twelve-month period ended June 30, 2006. Results for the prior twelve-month period include a $10 million, or $0.16 per share, nonrecurring charge recorded in the fourth quarter of 2005 related to an injuries and damages incident, partially offset by the favorable property tax settlement.

Natural Gas Operations Segment Results

Second Quarter

Operating margin, defined as operating revenues less the cost of gas sold, increased $6.5 million, or five percent, in the second quarter of 2007 compared to the second quarter of 2006. Rate relief added $3 million in operating margin compared to the prior year (consisting of $1 million in California attrition amounts and a $2 million increase from implementing a California equalized margin tracker mechanism, effective January 2007). New customers accounted for the remaining incremental operating margin during the quarter as the Company added 57,000 customers during the last twelve months, an increase of three percent. Warmer-than-normal temperatures were experienced during both quarters, but had no incremental impact between quarters.

 

Operating expenses for the quarter increased $13 million, or 11 percent, compared to the second quarter of 2006 primarily due to general cost increases and incremental operating costs associated with serving additional customers. Higher uncollectible and employee-related costs also contributed to the operating expense increase. The increase also reflects the impact of the favorable nonrecurring property tax benefit recognized in the second quarter of 2006.

 

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Other income improved $1.7 million primarily due to higher returns on long-term investments. Net financing costs were relatively unchanged between periods as strong operating cash flows, collection of construction advances, and common stock issuances mitigated the need for incremental borrowings to finance construction activities.

 

Twelve Months to Date

Operating margin increased $67 million between periods. Rate relief in Arizona and California added $34 million (net of the California equalized margin tracker mechanism year-to-date decrease of $6 million). Customer growth contributed an incremental $19 million. Differences in heating demand, caused primarily by weather variations, accounted for a $14 million increase in operating margin as warmer-than-normal temperatures were experienced during both periods (during the current twelve-month period the negative impact was $7 million, while the negative impact during the prior twelve-month period was $21 million).

 

Operating expenses increased $27 million, or six percent, between periods primarily due to general increases in labor and maintenance costs, and incremental operating costs associated with serving additional customers. Higher uncollectible and employee-related costs also contributed to the increase. The prior twelve-month period included the impact of the previously noted $10 million nonrecurring injuries and damages charge, partially offset by the favorable property tax settlement. Net financing costs decreased slightly between periods due to strong operating cash flows.

 

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Southwest Gas Corporation provides natural gas service to approximately 1,800,000 customers in Arizona, Nevada, and California. Its service territory is centered in the fastest-growing region of the country.

 

This press release may contain statements which constitute "forward-looking statements" within the meaning of the 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, changes in natural gas prices, the ability to recover costs through the PGA mechanism, the effects of regulation/deregulation, the timing and amount of rate relief, changes in rate design, changes in gas procurement practices, changes in capital requirements and funding, the impact of conditions in the capital markets on financing costs, changes in construction expenditures and financing, changes in operations and maintenance expenses, future liability claims, changes in pipeline capacity for the transportation of gas and related costs, acquisitions and management’s plans related thereto, competition, and the ability to raise capital in external financings. In addition, the Company can provide no assurance that its discussions regarding certain trends relating to its financing, operations, and maintenance expenses will continue in future periods.

 

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SOUTHWEST GAS CONSOLIDATED EARNINGS DIGEST

(In thousands, except per share amounts)

 

 

QUARTER ENDED JUNE 30,
 2007
 2006
Consolidated Operating Revenues     $ 426,537   $ 430,902  
Net Income (Loss)     $ (337 ) $ 3,709  
Average Number of Common Shares Outstanding       42,226     40,174  
Basic Earnings (Loss) Per Share     $ (0.01 ) $ 0.09  
Diluted Earnings (Loss) Per Share     $ (0.01 ) $ 0.09  


SIX MONTHS ENDED JUNE 30,
 2007
 2006
Consolidated Operating Revenues     $ 1,220,253   $ 1,107,843  
Net Income     $ 49,427   $ 47,889  
Average Number of Common Shares Outstanding       42,103     39,835  
Basic Earnings Per Share     $ 1.17   $ 1.20  
Diluted Earnings Per Share     $ 1.16   $ 1.19  


TWELVE MONTHS ENDED JUNE 30,
 2007
 2006
Consolidated Operating Revenues     $ 2,137,168   $ 1,918,116  
Net Income     $ 85,398   $ 61,700  
Average Number of Common Shares Outstanding       41,691     39,339  
Basic Earnings Per Share     $ 2.05   $ 1.57  
Diluted Earnings Per Share     $ 2.03   $ 1.55  

 

 

 

 

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

THREE MONTHS ENDED
JUNE 30,
 SIX MONTHS ENDED
JUNE 30,
 TWELVE MONTHS ENDED
JUNE 30,
2007
 2006
 2007
 2006
 2007
 2006
Results of Consolidated Operations                            
  Contribution to net income (loss) - gas operations   $ (2,855 ) $ 9   $ 45,773   $ 42,086   $ 75,160   $ 48,732  
  Contribution to net income - construction services       2,518     3,700     3,654     5,803     10,238     12,968  
  Net income (loss)     $ (337 ) $ 3,709   $ 49,427   $ 47,889   $ 85,398   $ 61,700  
  Earnings (loss) per share - gas operations     $ (0.07 ) $ --   $ 1.09   $ 1.06   $ 1.80   $ 1.24  
  Earnings per share - construction services       0.06     0.09     0.08     0.14     0.25     0.33  
  Basic earnings (loss) per share     $ (0.01 ) $ 0.09   $ 1.17   $ 1.20   $ 2.05   $ 1.57  
  Diluted earnings (loss) per share     $ (0.01 ) $ 0.09   $ 1.16   $ 1.19   $ 2.03   $ 1.55  
  Average outstanding common shares       42,226     40,174     42,103     39,835     41,691     39,339  
  Average shares outstanding (assuming dilution)       --     40,541     42,516     40,196     42,126     39,704  
                           
                           
Results of Natural Gas Operations    
  Gas operating revenues     $ 344,233   $ 354,168   $ 1,071,248   $ 962,310   $ 1,836,332   $ 1,624,536  
  Net cost of gas sold       198,417     214,823     692,628     612,320     1,114,296     969,499  
  Operating margin      145,816     139,345     378,620     349,990     722,036     655,037  
  Operations and maintenance expense       83,090     76,883     167,625     155,270     333,158     320,474  
  Depreciation and amortization      39,076     36,563     77,606     72,116     152,144     141,640  
  Taxes other than income taxes       9,938     5,620     20,405     16,237     39,162     34,888  
  Operating income       13,712     20,279     112,984     106,367     197,572     158,035  
  Other income (expense)       3,648     1,929     5,024     4,881     10,192     7,882  
  Net interest deductions       21,315     21,252     42,463     43,207     84,823     84,881  
  Net interest deductions on subordinated debentures       1,932     1,931     3,863     3,862     7,725     7,724  
  Income (loss) before income taxes       (5,887 )   (975 )   71,682     64,179     115,216     73,312  
  Income tax expense (benefit)       (3,032 )   (984 )   25,909     22,093     40,056     24,580  
  Contribution to net income (loss) - gas operations     $ (2,855 ) $ 9   $ 45,773   $ 42,086   $ 75,160   $ 48,732  


SOUTHWEST GAS CORPORATION
SELECTED STATISTICAL DATA
JUNE 30, 2007

FINANCIAL STATISTICS    
Market value to book value per share at quarter end   150%
Twelve months to date return on equity -- total company   9.6%
                                                           -- gas segment  8.9%
Common stock dividend yield at quarter end   2.5%


GAS OPERATIONS SEGMENT

Rate Jurisdiction
 Authorized
Rate Base
(In thousands)
 Authorized
Rate of
Return
 Authorized
Return on
Common
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

SIX MONTHS ENDED
JUNE 30,
 TWELVE MONTHS ENDED
JUNE 30,
(In dekatherms)
 2007
 2006
 2007
 2006
Residential      47,230,392    43,884,112    71,106,776    66,472,627  
Small commercial    18,619,628    18,184,352    31,420,924    30,683,620  
Large commercial    6,925,266    6,784,356    12,966,442    11,917,991  
Industrial / Other    5,508,314    6,818,874    13,613,692    15,293,079  
Transportation    54,532,239    54,169,141    117,886,894    120,615,281  
Total system throughput    132,815,839    129,840,835    246,994,728    244,982,598  


HEATING DEGREE DAY COMPARISON
  
  
  
  
Actual      1,340    1,291    1,872    1,763  
Ten-year average    1,370    1,376    1,952    1,970  

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