Southwest Gas Corporation Reports Second Quarter Results
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."
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
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 employe-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.
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.
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.
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
SOURCE Southwest Gas Corporationmedia, Cynthia Messina, +1-702-876-7132, or shareholder, Ken Kenny, +1-702-876-7237,
both of Southwest Gas Corporation