EX-99 2 exhibit99.htm EARNINGS RELEASE DATED NOVEMBER 2, 2005

November 2, 2005

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 $0.43 per share for the third quarter of 2005, a $0.03 improvement from the $0.46 per share loss reported for the third quarter of 2004. Net loss for the third quarter of 2005 was $16.4 million, matching the net loss of $16.4 million recorded in the third quarter of 2004. The third quarter 2004 results included a nonrecurring income tax benefit of $1.6 million, or $0.05 per share. The change in net loss per share resulted from an increase in average shares outstanding of 3.1 million, or nine percent, between the third quarters of 2004 and 2005 due to issuances under the Company’s various stock plans. Because of 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, “Natural gas operating results, excluding the prior-year tax benefit, improved between quarters due to system-wide customer growth and rate relief and rate design changes in Nevada and California. A continuing, significant focus of ours is improving Arizona returns and in that regard we recently completed the hearing process for the current general rate case. We presented compelling testimony supporting our overall rate request and the need for changes in rate design. We remain hopeful of a reasonable decision in the first quarter of 2006.”

 

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Shaw also commented on natural gas supplies and rising natural gas prices. “We fully expect natural gas supplies to be available for the winter season, but continue to monitor prices closely. We have also participated in regulatory proceedings in each of our three states to address ways of minimizing customer impacts. To that end, we are encouraging conservation, weatherization, and use of Company-sponsored billing programs that allow for leveling of payments.”

 

For the twelve months ended September 30, 2005, consolidated net income was $54 million, or $1.44 per basic share, compared to $50.8 million, or $1.47 per basic share, during the twelve-month period ended September 30, 2004. Results for the twelve months ended September 30, 2004 included nonrecurring income tax benefits of $3.6 million, or approximately $0.10 per basic share.

 

Natural Gas Operations Segment Results

Third Quarter

Operating margin, defined as operating revenues less the cost of gas sold, increased approximately $7 million, or seven percent, in the third quarter of 2005 compared to the third quarter of 2004. During the last twelve months, the Company added 79,000 customers (excluding 19,000 customers associated with the acquisition of the South Lake Tahoe service territory of Avista Corporation), an increase of five percent. Customer growth contributed an incremental $4 million in operating margin during the quarter. Incremental rate relief in Nevada and California added $3 million in margin compared to the prior year.

 

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Operating expenses for the quarter increased $5.3 million, or five percent, compared to the third quarter of 2004 primarily due to general cost increases and incremental operating costs associated with serving additional customers.

 

Twelve Months to Date

Operating margin increased approximately $39 million, or seven percent, between periods. Continuing customer growth contributed an incremental $20 million. Rate relief in California and Nevada added $15 million. Differences in heating demand caused by weather variations between periods, net of lower usage due to conservation and energy efficiencies, resulted in a net $4 million margin increase. Warmer-than-normal temperatures were experienced during both periods. The unfavorable impacts of these factors were approximately $10 million in the current twelve-month period and $14 million in the prior period.

 

Operating expenses increased $26.1 million, or six percent, between periods reflecting general increases in operations and maintenance costs as well as incremental costs (including depreciation and general taxes) associated with serving additional customers. Additional factors included increases in insurance premiums, uncollectible expenses, employee-related expenses, and compliance costs.

 

Net financing costs rose $5.9 million, or seven percent, between periods primarily due to an increase in average debt outstanding to help finance growth and higher variable-rate interest costs.

 

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Southwest Gas Corporation provides natural gas service to approximately 1,677,000 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 SEPTEMBER 30,

 

2005

 

2004

Consolidated Operating Revenues

 

$

313,278

 

$

264,467

Net Loss

 

$

16,444

 

$

16,353

Average Number of Common Shares Outstanding

 

 

38,528

 

 

35,412

Loss Per Share

 

$

0.43

 

$

0.46

 

 

 

 

 

 

 

NINE MONTHS ENDED SEPTEMBER 30,

 

2005

 

2004

Consolidated Operating Revenues

 

$

1,217,288

 

$

1,016,564

Net Income

 

$

13,568

 

$

16,329

Average Number of Common Shares Outstanding

 

 

37,780

 

 

34,857

Basic Earnings Per Share

 

$

0.36

 

$

0.47

Diluted Earnings Per Share

 

$

0.36

 

$

0.47

 

 

 

 

 

 

 

TWELVE MONTHS ENDED SEPTEMBER 30,

 

2005

 

2004

Consolidated Operating Revenues

 

$

1,677,784

 

$

1,368,269

Net Income

 

$

54,014

 

$

50,803

Average Number of Common Shares Outstanding

 

 

37,392

 

 

34,661

Basic Earnings Per Share

 

$

1.44

 

$

1.47

Diluted Earnings Per Share

 

$

1.43

 

$

1.45

 

 

 

-end-

 

 

 

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

THREE MONTHS ENDED
SEPTEMBER 30,
 NINE MONTHS ENDED
SEPTEMBER 30,
 TWELVE MONTHS ENDED
SEPTEMBER 30,
2005
 2004
 2005
 2004
 2005
 2004
Results of Consolidated Operations                            
   Contribution to net income (loss) - gas operations   $ (20,023 ) $ (18,954 ) $ 7,001   $ 10,992   $ 44,363   $ 44,212  
   Contribution to net income - construction services    3,579    2,601    6,567    5,337    9,651    6,591  
   Net income (loss)   $ (16,444 ) $ (16,353 ) $ 13,568   $ 16,329   $ 54,014   $ 50,803  
   Earnings (loss) per share - gas operations   $ (0.52 ) $ (0.53 ) $ 0.19   $ 0.32   $ 1.18   $ 1.28  
   Earnings per share - construction services      0.09    0.07    0.17    0.15    0.26    0.19  
   Basic earnings (loss) per share   $ (0.43 ) $ (0.46 ) $ 0.36   $ 0.47   $ 1.44   $ 1.47  
   Diluted earnings (loss) per share   $ (0.43 ) $ (0.46 ) $ 0.36   $ 0.47   $ 1.43   $ 1.45  
   Average outstanding common shares    38,528    35,412    37,780    34,857    37,392    34,661  
   Average shares outstanding (assuming dilution)    --    --    38,101    35,116    37,722    34,942  
   
Results of Natural Gas Operations    
   Gas operating revenues   $ 239,318   $ 206,459   $ 1,032,349   $ 866,999   $ 1,427,402   $ 1,168,160  
   Net cost of gas sold    128,745    102,978    599,697    450,690    794,773    574,285  
   Operating margin    110,573    103,481    432,652    416,309    632,629    593,875  
   Operations and maintenance expense    77,445    74,289    226,678    214,957    302,521    285,317  
   Depreciation and amortization    34,611    32,844    103,068    97,396    136,187    128,815  
   Taxes other than income taxes    9,888    9,528    30,277    29,026    38,920    37,406  
   Operating income (loss)    (11,371 )  (13,180 )  72,629    74,930    155,001    142,337  
   Other income (expense)    767    1,566    2,853    1,627    2,837    3,073  
   Net interest deductions    20,323    19,814    60,244    57,122    81,259    75,382  
   Net interest deductions on subordinated debentures    1,931    1,930    5,792    5,791    7,725    7,721  
   Income (loss) before income taxes    (32,858 )  (33,358 )  9,446    13,644    68,854    62,307  
   Income tax expense (benefit)    (12,835 )  (14,404 )  2,445    2,652    24,491    18,095  
   Contribution to net income (loss) - gas operations   $ (20,023 ) $ (18,954 ) $ 7,001   $ 10,992   $ 44,363   $ 44,212  

SOUTHWEST GAS CORPORATION
SELECTED STATISTICAL DATA
SEPTEMBER 30, 2005

FINANCIAL STATISTICS    
Market value to book value per share at quarter end   142 %
Twelve months to date return on equity -- total company   7.4 %
                                                                       -- gas segment  6.4 %
Common stock dividend yield at quarter end   3.0 %

GAS OPERATIONS SEGMENT

Rate Jurisdiction Authorized
Rate Base
(In thousands)		 Authorized
Rate of
Return		 Authorized
Return on
Common
Equity
Arizona     $ 688,202    9 .20%  11 .00%
Southern Nevada    574,285    7 .45  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)    75,059    9 .69  11 .60

(1) Estimated amounts based on rate case settlement.

SYSTEM THROUGHPUT BY CUSTOMER CLASS NINE MONTHS ENDED
SEPTEMBER 30,
 TWELVE MONTHS ENDED
SEPTEMBER 30,
(In dekatherms) 2005 2004 2005 2004
Residential   49,144,115   48,453,997   67,407,463   63,765,008  
Small commercial  22,266,954   22,224,904   30,426,489   29,547,361  
Large commercial  8,506,670   7,782,869   11,213,737   10,193,613  
Industrial / Other  12,131,816   12,163,748   16,353,624   15,390,493  
Transportation  95,889,546   91,793,113   129,922,926   124,900,851  
Total system throughput   187,939,101   182,418,631   255,324,239   243,797,326  
         
HEATING DEGREE DAY COMPARISON 
Actual  1,291   1,350   1,917   1,897  
Ten-year average  1,391   1,392   1,937   1,943  

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