UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 9, 2006
SOUTHWEST GAS CORPORATION
(Exact name of registrant as specified in its charter)
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California |
1-7850 |
88-0085720 |
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(State or other jurisdiction of |
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(I.R.S. Employer |
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incorporation or organization) |
File Number) |
Identification No.) | |||||||
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5241 Spring Mountain Road |
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Post Office Box 98510 |
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Las Vegas, Nevada |
89193-8510 | ||||||
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(Address of principal executive offices) |
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Registrant's telephone number, including area code: (702) 876-7237
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 2.02 |
Results of Operations and Financial Condition. |
On August 9, 2006, Southwest Gas Corporation (the Company) released summary financial information to the general public, including the investment community, regarding the Company’s operating performance for the quarter, six, and twelve months ended June 30, 2006. A copy of the Company’s press release and summary financial information is attached hereto as Exhibit 99.
This Form 8-K and the attached exhibit are provided under Item 2.02 of Form 8-K and are furnished to, but not filed with, the Securities and Exchange Commission.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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SOUTHWEST GAS CORPORATION |
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Date: August 9, 2006 |
/s/ ROY R. CENTRELLA |
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Roy R. Centrella |
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Vice President/Controller and |
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Chief Accounting Officer |
EXHIBIT INDEX
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Exhibit |
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No. |
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Description |
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99 |
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Press Release and summary financial information dated August 9, 2006. | |
August 9, 2006
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
ANNOUNCES SECOND QUARTER EARNINGS
Las Vegas - Southwest Gas Corporation announced earnings of $0.09 per basic share for the second quarter of 2006, a $0.16 improvement from the loss of $0.07 per basic share recorded during the second quarter of 2005. The current-quarter results include a benefit of approximately $0.07 per share related to a nonrecurring property tax settlement reached in the second quarter of 2006. Net income for the second quarter of 2006 was $3.7 million, compared to a loss of $2.8 million in the prior period. Due to the seasonal nature of the business, results during the second and third quarters are not generally indicative of earnings for a complete twelve-month period.
According to Jeffrey W. Shaw, Chief Executive Officer, "This marks the first time in recent memory that we have recognized net income during the second quarter. Excluding the property tax settlement, earnings still would have been $0.02 per basic share due to higher operating margin and continued strong performance from our construction services subsidiary. We optimistically anticipate a year of improved earnings results.”
-more-
For the twelve months ended June 30, 2006, consolidated net income was $61.7 million, or $1.57 per basic share, compared to $54.1 million, or $1.48 per basic share, during the twelve-month period ended June 30, 2005. Results for the current 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 approximately $8 million, or six percent, in the second quarter of 2006 compared to the second quarter of 2005. During the last twelve months, the Company added 80,000 customers, an increase of five percent. New customers contributed an incremental $3 million in operating margin during the quarter. Rate relief in Southwest’s service territories added $9 million ($8 million in Arizona) in operating margin compared to the prior year. Differences in heating demand caused primarily by weather variations between periods resulted in a $4 million operating margin decrease.
In April 2006, a settlement was reached regarding property tax valuation disputes in Arizona for the tax years 2001-2005. A decrease to property tax expense of $3.7 million and an accrual of $746,000 in interest income was recorded in the second quarter of 2006. This entry resulted in an after-tax benefit of approximately $0.07 per share.
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Operating expenses for the quarter were relatively unchanged, compared to the second quarter of 2005. General cost increases and incremental operating costs associated with serving additional customers were offset by the property tax settlement in Arizona. Net financing costs increased $1.2 million, or six percent, between periods primarily due to an increase in average debt outstanding (to help finance growth and the unrecovered purchased gas adjustment (PGA) balance) and higher rates on variable-rate debt.
Twelve Months to Date
Operating margin increased $30 million between periods. Customer growth contributed an incremental $27 million and rate relief in all service territories added $17 million. Differences in heating demand caused primarily by weather variations between periods resulted in a $14 million operating margin decrease as warmer-than-normal temperatures were experienced during both periods.
Operating expenses increased $24.7 million, or five percent, between periods reflecting a $10 million nonrecurring injuries and damages charge, along with general increases in labor and maintenance costs, and incremental operating costs associated with serving additional customers. These costs were partially offset by the property tax settlement in Arizona.
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Other income improved $4.2 million primarily due to higher returns on long-term investments, increased interest income on higher deferred PGA balances, and interest income related to the property tax settlement in Arizona. Net financing costs rose $4.1 million, or five percent, between periods primarily due to an increase in average debt outstanding (to help finance growth and the unrecovered PGA balance) and higher rates on variable-rate debt.
Southwest Gas Corporation provides natural gas service to 1,743,000 customers in Arizona, Nevada, and California. Its service territories are 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, |
2006 |
2005 | ||||||
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| Consolidated Operating Revenues | $ | 430,902 | $ | 361,130 | ||||
| Net Income (Loss) | $ | 3,709 | $ | (2,817 | ) | |||
| Average Number of Common Shares Outstanding | 40,174 | 37,701 | ||||||
| Basic Earnings (Loss) Per Share | $ | 0.09 | $ | (0.07 | ) | |||
| Diluted Earnings (Loss) Per Share | $ | 0.09 | $ | (0.07 | ) | |||
| SIX MONTHS ENDED JUNE 30, |
2006 |
2005 | ||||||
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| Consolidated Operating Revenues | $ | 1,107,843 | $ | 904,010 | ||||
| Net Income | $ | 47,889 | $ | 30,012 | ||||
| Average Number of Common Shares Outstanding | 39,835 | 37,400 | ||||||
| Basic Earnings Per Share | $ | 1.20 | $ | 0.80 | ||||
| Diluted Earnings Per Share | $ | 1.19 | $ | 0.80 | ||||
| TWELVE MONTHS ENDED JUNE 30, |
2006 |
2005 | ||||||
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| Consolidated Operating Revenues | $ | 1,918,116 | $ | 1,628,973 | ||||
| Net Income | $ | 61,700 | $ | 54,105 | ||||
| Average Number of Common Shares Outstanding | 39,339 | 36,606 | ||||||
| Basic Earnings Per Share | $ | 1.57 | $ | 1.48 | ||||
| Diluted Earnings Per Share | $ | 1.55 | $ | 1.47 | ||||
-end-
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, | ||||||||||||||||||
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2005 |
2006 |
2005 |
2006 |
2005 | |||||||||||||||
| Results of Consolidated Operations | ||||||||||||||||||||
| Contribution to net income (loss) - gas operations | $ | 9 | $ | (5,362 | ) | $ | 42,086 | $ | 27,024 | $ | 48,732 | $ | 45,432 | |||||||
| Contribution to net income - construction services | 3,700 | 2,545 | 5,803 | 2,988 | 12,968 | 8,673 | ||||||||||||||
| Net income (loss) | $ | 3,709 | $ | (2,817 | ) | $ | 47,889 | $ | 30,012 | $ | 61,700 | $ | 54,105 | |||||||
| Earnings (loss) per share - gas operations | $ | -- | $ | (0.14 | ) | $ | 1.06 | $ | 0.72 | $ | 1.24 | $ | 1.24 | |||||||
| Earnings per share - construction services | 0.09 | 0.07 | 0.14 | 0.08 | 0.33 | 0.24 | ||||||||||||||
| Basic earnings (loss) per share | $ | 0.09 | $ | (0.07 | ) | $ | 1.20 | $ | 0.80 | $ | 1.57 | $ | 1.48 | |||||||
| Diluted earnings (loss) per share | $ | 0.09 | $ | (0.07 | ) | $ | 1.19 | $ | 0.80 | $ | 1.55 | $ | 1.47 | |||||||
| Average outstanding common shares | 40,174 | 37,701 | 39,835 | 37,400 | 39,339 | 36,606 | ||||||||||||||
| Average shares outstanding (assuming dilution) | 40,541 | -- | 40,196 | 37,701 | 39,704 | 36,916 | ||||||||||||||
| Results of Natural Gas Operations | ||||||||||||||||||||
| Gas operating revenues | $ | 354,168 | $ | 298,048 | $ | 962,310 | $ | 793,031 | $ | 1,624,536 | $ | 1,394,543 | ||||||||
| Net cost of gas sold | 214,823 | 167,025 | 612,320 | 470,952 | 969,499 | 769,006 | ||||||||||||||
| Operating margin | 139,345 | 131,023 | 349,990 | 322,079 | 655,037 | 625,537 | ||||||||||||||
| Operations and maintenance expense | 76,883 | 74,957 | 155,270 | 149,233 | 320,474 | 299,365 | ||||||||||||||
| Depreciation and amortization | 36,563 | 34,210 | 72,116 | 68,457 | 141,640 | 134,420 | ||||||||||||||
| Taxes other than income taxes | 5,620 | 10,075 | 16,237 | 20,389 | 34,888 | 38,560 | ||||||||||||||
| Operating income | 20,279 | 11,781 | 106,367 | 84,000 | 158,035 | 153,192 | ||||||||||||||
| Other income (expense) | 1,929 | 1,000 | 4,881 | 2,086 | 7,882 | 3,636 | ||||||||||||||
| Net interest deductions | 21,252 | 20,039 | 43,207 | 39,921 | 84,881 | 80,750 | ||||||||||||||
| Net interest deductions on subordinated debentures | 1,931 | 1,930 | 3,862 | 3,861 | 7,724 | 7,724 | ||||||||||||||
| Income (loss) before income taxes | (975 | ) | (9,188 | ) | 64,179 | 42,304 | 73,312 | 68,354 | ||||||||||||
| Income tax expense (benefit) | (984 | ) | (3,826 | ) | 22,093 | 15,280 | 24,580 | 22,922 | ||||||||||||
| Contribution to net income (loss) - gas operations | $ | 9 | $ | (5,362 | ) | $ | 42,086 | $ | 27,024 | $ | 48,732 | $ | 45,432 | |||||||
SOUTHWEST GAS CORPORATION
SELECTED STATISTICAL DATA
JUNE 30, 2006
| FINANCIAL STATISTICS | |||
| Market value to book value per share at quarter end | 156% | ||
| Twelve months to date return on equity -- total company | 8.0% | ||
| -- gas segment | 6.6% | ||
| Common stock dividend yield at quarter end | 2.6% | ||
GAS OPERATIONS SEGMENT
| Rate Jurisdiction |
Authorized Rate Base (In thousands) |
Authorized Rate of Return |
Authorized Return on Common Equity | ||||||||
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| Arizona | $ | 922,721 | 8 | .40% | 9 | .50% | |||||
| 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) | 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, | ||||||||
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2006 |
2005 |
2006 |
2005 | |||||
| Residential | 43,884,112 | 42,458,007 | 66,472,627 | 67,039,311 | |||||
| Small commercial | 18,184,352 | 17,507,959 | 30,683,620 | 30,415,892 | |||||
| Large commercial | 6,784,356 | 6,050,238 | 11,917,991 | 11,256,312 | |||||
| Industrial / Other | 6,818,874 | 7,180,025 | 15,293,079 | 16,700,590 | |||||
| Transportation | 54,169,141 | 60,950,204 | 120,615,281 | 130,559,087 | |||||
| Total system throughput | 129,840,835 | 134,146,433 | 244,982,598 | 255,971,192 | |||||
| HEATING DEGREE DAY COMPARISON |
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| Actual | 1,294 | 1,277 | 1,769 | 1,947 | |||||
| Ten-year average | 1,380 | 1,376 | 1,976 | 1,969 | |||||
Heating degree days for prior periods have been recalculated using the current period customer mix.