- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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) April 17, 1995 SOUTHWEST GAS CORPORATION (exact name of registrant as specified in its charter) California 1-7850 88-0085720 (State or other jurisdiction of (Commission (I.R.S. Employer incorporation or organization) File Number) Identification No.) 5241 Spring Mountain Road Post Office Box 98510 Las Vegas, Nevada 89193-8510 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (702) 876-7237 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ ITEM 5. OTHER EVENTS SOUTHWEST GAS ANNOUNCES FIRST QUARTER EARNINGS Las Vegas - Southwest Gas Corporation announced 1995 first quarter earnings of $0.68 per share, a $0.39 decrease from the $1.07 per share reported for the same period in 1994. Consolidated net income applicable to common stock was $14,550,000, compared to $22,571,000 for the same quarter in 1994. Average outstanding common shares increased to 21,396,000 in the first quarter of 1995 from 21,023,000 in the first quarter of 1994. The gas operations segment's contribution to consolidated net income was $14,449,000, compared to a $21,734,000 contribution reported for the first quarter of 1994. According to Michael O. Maffie, President and Chief Executive Officer, the decrease was principally the result of lower operating margin (revenues less cost of gas purchased) directly attributable to significantly warmer weather throughout the Company's service territories when compared to the same period in 1994. In addition, higher operating expenses and net interest deductions were incurred as a result of the continued expansion and upgrading of the gas system to accommodate the Company's unprecedented customer growth, which continues to significantly outpace industry averages. Operating margin decreased approximately $11 million in the first quarter of 1995 as compared to the same period in 1994 due to the differences in heating demand between periods. Unseasonably warm weather in the Company's three largest operating areas, Phoenix, Las Vegas and Tucson, resulted in weather- sensitive customers purchasing approximately 14 percent less gas than anticipated. On a weather-normalized basis, first quarter 1995 operating margin would have been approximately $14.6 million, or 14 percent, greater than actually reported, while first quarter 1994 operating margin would have been approximately $3.6 million, or three percent greater than actual. Record customer growth partially mitigated the $11 million negative impact of warmer weather on operating margin between the two quarters. During the first quarter of 1995, the Company billed an average of 48,000 more customers per month than in the first quarter of 1994, resulting in approximately $5.3 million of additional operating margin. Overall, on a net basis, operating margin declined $5.7 million, or five percent, in the first quarter of 1995 when compared to the first quarter of 1994. Operating expenses and net interest deductions increased due to new investment in gas plant and higher costs incurred as a result of the Company's providing service to meet the record customer growth. This growth is exacting a net earnings penalty in the form of higher operating and financing costs as the Company builds the infrastructure necessary to accommodate customer growth. However, net earnings should improve as construction programs are completed, additional rate relief is applied for and granted, and new customers contribute incremental operating margin. The Company's financial services subsidiary, PriMerit Bank, reported 1995 first quarter net income of $1,678,000 compared to net income of $2,189,000 reported for the first quarter of 1994. The difference between quarters was principally due to the first quarter 1994 recognition of a $1,690,000 net gain ($1.1 million after tax) on the sale of the Bank's credit card portfolio. PriMerit contributed $196,000 to first quarter 1995 consolidated net income after deducting tax-effected carrying costs associated with its acquisition by Southwest Gas Corporation compared to a $976,000 contribution in the first quarter of 1994. First quarter 1995 core bank earnings (net income exclusive of goodwill amortization and one-time, nonrecurring transactions) were $2,952,000, compared to first quarter 1994 core bank earnings of $2,375,000, a 24 percent improvement. For the twelve months ended March 31, 1995, consolidated net income applicable to common stock was $17,770,000 and earnings per share were $0.84, compared to consolidated net income applicable to common stock of $20,316,000 and earnings per share of $0.98 during the twelve month period ended March 31, 1994. The gas operations segment's contribution to consolidated net income for the twelve months ended March 31, 1995 was $16,240,000 compared to a $20,792,000 contribution reported for the prior period. The decrease in earnings was principally attributable to increased operations and maintenance expenses, depreciation expense, general taxes and net interest deductions. Differences in heating demand between periods also negatively impacted current period net income. Prior period results include the December 1993 write-off of certain pipe replacement costs in Arizona, as ordered by the Arizona Corporation Commission. The Company wrote off $15,886,000 in gross plant, which resulted in a noncash, after-tax reduction to prior period net income of $9,264,000, or $0.44 per share. Net earnings from PriMerit Bank were $7,161,000 (contributing $1,997,000 to consolidated net income after deducting tax-effected carrying costs) for the twelve months ended March 31, 1995, compared to net income of $5,131,000 (resulting in a contribution of $198,000 after deducting tax-effected carrying costs) for the twelve-month period ended March 31, 1994. Core bank earnings were $11,884,000, compared to $8,550,000 for the earlier period, a 39 percent improvement. Southwest Gas Corporation is a diversified natural gas and financial services organization. It provides natural gas to approximately 989,000 customers in Arizona, Nevada and California. PriMerit Bank, a federally chartered savings bank, markets a wide variety of consumer financial products and services through its branches in northern and southern Nevada. SOUTHWEST GAS CONSOLIDATED EARNINGS DIGEST QUARTER ENDED MARCH 31, 1995 1994 - ----------------------- -------------- -------------- Revenues $ 238,888,000 $ 239,155,000 Net Income $ 14,645,000 $ 22,710,000 Net Income Applicable to Common Stock $ 14,550,000 $ 22,571,000 Average Number of Common Shares Outstanding 21,396,000 21,023,000 Earnings Per Share of Common Stock $ 0.68 $ 1.07 TWELVE MONTHS ENDED MARCH 31, 1995 1994 - ----------------------------- -------------- -------------- Revenues $ 727,689,000 $ 708,435,000 Net Income $ 18,237,000 $ 20,990,000 Net Income Applicable to Common Stock $ 17,770,000 $ 20,316,000 Average Number of Common Shares Outstanding 21,170,000 20,833,000 Earnings Per Share of Common Stock $ 0.84 $ 0.98 SOUTHWEST GAS CORPORATION SUMMARY STATEMENTS OF INCOME (In thousands, except per share amounts) (Unaudited)
THREE MONTHS ENDED TWELVE MONTHS ENDED MARCH 31, MARCH 31, -------------------------------- -------------------------------- 1995 1994 1995 1994 - --------------------------------------------------------------------------------------------------------------------------------- GAS OPERATIONS SEGMENT: Operating revenues $ 203,521 $ 207,297 $ 595,492 $ 563,069 Net cost of gas purchased 98,906 96,996 251,833 222,547 - --------------------------------------------------------------------------------------------------------------------------------- Operating margin 104,615 110,301 343,659 340,522 Operations and maintenance expenses 45,867 42,420 181,631 170,776 Depreciation, amortization, and general taxes 21,919 20,396 84,091 79,731 - --------------------------------------------------------------------------------------------------------------------------------- Operating income 36,829 47,485 77,937 90,015 Net interest deductions 13,323 11,652 51,136 43,475 - --------------------------------------------------------------------------------------------------------------------------------- Pre-tax utility income 23,506 35,833 26,801 46,540 Utility income tax expense 9,127 14,017 9,936 16,713 - --------------------------------------------------------------------------------------------------------------------------------- Net utility income 14,379 21,816 16,865 29,827 Other income (expense), net 70 (82) (625) 229 Arizona pipe replacement disallowance, net --- --- --- (9,264) - --------------------------------------------------------------------------------------------------------------------------------- Contribution to net income - gas operations segment 14,449 21,734 16,240 20,792 - --------------------------------------------------------------------------------------------------------------------------------- FINANCIAL SERVICES SEGMENT: Net interest income after loan loss provision 13,418 12,562 52,270 50,965 Net loss from real estate operations (433) (485) (560) (1,232) Other income, net 2,243 3,812 9,062 13,821 General and administrative expenses 12,116 11,954 47,532 51,206 - --------------------------------------------------------------------------------------------------------------------------------- Pre-tax income 3,112 3,935 13,240 12,348 Income tax expense 1,434 1,746 6,079 7,217 - --------------------------------------------------------------------------------------------------------------------------------- Net income before carrying cost allocation 1,678 2,189 7,161 5,131 Acquisition carrying costs, net of tax - NOTE 5 (1,482) (1,213) (5,164) (4,933) - --------------------------------------------------------------------------------------------------------------------------------- Contribution to net income - financial services segment 196 976 1,997 198 - --------------------------------------------------------------------------------------------------------------------------------- Net income 14,645 22,710 18,237 20,990 Preferred & preference dividends 95 139 467 674 - --------------------------------------------------------------------------------------------------------------------------------- Net income applicable to common stock $ 14,550 $ 22,571 $ 17,770 $ 20,316 ================================================================================================================================= Earnings per share $ 0.68 $ 1.07 $ 0.84 $ 0.98 ================================================================================================================================= Earnings per share excluding disallowance $ --- $ --- $ --- $ 1.42 ================================================================================================================================= Average outstanding common shares 21,396 21,023 21,170 20,833 ================================================================================================================================= See Notes to Summary Financial Statements. /TABLE
SOUTHWEST GAS CORPORATION BALANCE SHEET AT MARCH 31, 1995 (In thousands) (Unaudited) ASSETS UTILITY PLANT Gas plant, net of accumulated depreciation $ 1,030,404 Construction work in progress 23,152 ------------ Net utility plant 1,053,556 ------------ OTHER PROPERTY AND INVESTMENTS PriMerit Bank - NOTE 2 177,532 Other 33,152 ------------ Total other property and investments 210,684 ------------ CURRENT AND ACCRUED ASSETS Cash, working funds and temporary cash investments 29,986 Receivables - less reserve of $1,959 for uncollectibles 41,509 Accrued utility revenue 29,653 Other 24,345 ------------ Total current and accrued assets 125,493 ------------ DEFERRED DEBITS Unamortized debt expense 14,082 Other deferred debits 42,801 ------------ Total deferred debits 56,883 ------------ TOTAL ASSETS $ 1,446,616 ============ CAPITALIZATION, LIABILITIES AND DEFERRED CREDITS CAPITALIZATION Common stockholders' equity Common stock equity, $1 par, 21,528 shares outstanding $ 299,734 Retained earnings 62,550 ------------ Total common stockholders' equity - NOTE 6 362,284 34.4% Preferred stock equity - NOTE 3 4,000 0.4 Long term debt - NOTE 4 687,286 65.2 ------------ ------- Total capitalization 1,053,570 100.0% ------------ ======= CURRENT AND ACCRUED LIABILITIES Notes Payable 70,000 Accounts payable 31,821 Customer deposits 22,514 Taxes accrued (including income taxes) 59,989 Deferred purchased gas costs 6,213 Other 44,049 ------------ Total current and accrued liabilities 234,586 ------------ DEFERRED CREDITS Deferred investment tax credits 20,524 Deferred income taxes 111,064 Other 26,872 ------------ Total deferred credits 158,460 ------------ TOTAL CAPITALIZATION, LIABILITIES AND DEFERRED CREDITS $ 1,446,616 ============ See Notes to Summary Financial Statements. /TABLE SOUTHWEST GAS CORPORATION STATEMENT OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 1995 (In thousands) (Unaudited)
CASH FLOWS FROM OPERATIONS: Net income $ 14,645 Adjustments to reconcile net income to net cash provided by operating activity: Depreciation and amortization 15,137 Change in receivables and payables 14,535 Change in accrued taxes 7,204 Undistributed earnings from subsidiaries (1,651) Change in gas cost related balancing items 23,472 Allowance for funds used during construction (485) Change in deferred taxes 1,213 Other 4,418 ----------- Net cash provided from operating activities 78,488 ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Change in notes payable (22,000) Dividends paid (4,478) Net change in long-term debt 3,870 Proceeds from stock issuance 3,605 Other (44) ----------- Net cash used in financing activities (19,047) ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Construction expenditures (33,929) Other (1,395) ----------- Net cash used in investing activities (35,324) ----------- Change in cash and temporary cash investments 24,117 Cash at beginning of period 5,869 ----------- Cash at end of period $ 29,986 =========== SUPPLEMENTAL INFORMATION: Interest paid, net of amount capitalized $ 16,766 Income taxes, net of refunds $ 5,179 See Notes to Summary Financial Statements. /TABLE SOUTHWEST GAS CORPORATION NOTES TO SUMMARY FINANCIAL STATEMENTS (In thousands, except par values) (Unaudited) NOTE 1 - BASIS OF PRESENTATION: The financial statements have been prepared by Southwest Gas Corporation (the Company) using the equity method of accounting for PriMerit Bank (PriMerit). Segmented information is presented within the income statement. The Financial Services segment includes the net income of PriMerit and its subsidiaries on a stand-alone basis, reduced by allocated carrying costs associated with the Company's investment in PriMerit (principally interest) net of taxes. This presentation is not in accordance with generally accepted accounting principles (GAAP), and certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted. The financial statement presentation in this report produces the same net income as the consolidated financial statements and, in management's opinion, is a fair representation of the operations and contributions to net income of the Company's two segments. NOTE 2 - INVESTMENT IN PRIMERIT BANK: The financing sources for Southwest's investment in PriMerit consist of approximately $62,400 of 9.375% series D debentures, $20,000 of 9.75% series F debentures, and 4,027 shares of common stock.
NOTE 3 - PREFERRED STOCK: Cumulative preferred stock, $100 par value, 9.5% series, 40 shares outstanding $ 4,000 =========== CURRENT REDEMPTION REQUIREMENTS $ 800 =========== NOTE 4 - LONG-TERM DEBT: Commercial paper facility $ 200,000 Debentures: Debentures, 9% series A, due 2011 26,964 Debentures, 9% series B, due 2011 31,226 Debentures, 8.75% series C, due 2011 18,485 Debentures, 9.375% series D, due 2017 120,000 Debentures, 10% series E, due 2013 23,074 Debentures, 9.75% series F, due 2002 100,000 Industrial revenue bonds - net of funds held in trust 177,972 Unamortized discount on long-term debt (10,435) ----------- TOTAL LONG-TERM DEBT $ 687,286 =========== CURRENT MATURITIES $ 5,000 =========== NOTE 5 - ACQUISITION CARRYING COSTS, NET:
NOTE 6 - COMMON STOCKHOLDERS' EQUITY: For purposes of this report, common stockholders' equity excludes PriMerit's unrealized loss on debt securities available for sale since PriMerit is presented on the equity method of accounting.THREE MONTHS ENDED TWELVE MONTHS ENDED MARCH 31, MARCH 31, -------------------------- -------------------------- 1995 1994 1995 1994 ----------- ----------- ----------- ----------- Interest expense $ (2,409) $ (1,968) $ (8,314) $ (7,873) Other intercompany expenses (60) (54) (293) (349) Income taxes 987 809 3,443 3,289 ----------- ----------- ----------- ----------- ACQUISITION CARRYING COSTS, NET $ (1,482) $ (1,213) $ (5,164) $ (4,933) =========== =========== =========== =========== SOUTHWEST GAS CORPORATION SELECTED STATISTICAL DATA MARCH 31, 1995 FINANCIAL STATISTICS Book value per share at quarter end - NOTE 6 $16.83 Market value to book value per share at quarter end 88% Twelve months to date return on equity -- total company 5.2% -- gas segment 5.8% Common stock dividend yield at quarter end 5.6% GAS OPERATIONS SEGMENT
Authorized Authorized Authorized Return on Rate Base Rate of Common Rate Jurisdiction (In thousands) Return Equity - ----------------- -------------- ---------- ---------- Central Arizona $ 267,348 9.13% 10.75% Southern Arizona 157,620 9.12 11.00 Southern Nevada 184,673 8.89 11.55 Northern Nevada 47,695 9.16 11.55 Southern California 69,486 9.94 11.35 Northern California 8,357 10.02 11.35 Paiute Pipeline Company 61,057 10.09 12.50
SYSTEM THROUGHPUT BY CUSTOMER CLASS THREE MONTHS ENDED TWELVE MONTHS ENDED MARCH 31, MARCH 31, ------------------------- ------------------------ (In dekatherms) 1995 1994 1995 1994 - ----------------------------------------------------------------------------------------------------------------- Residential 19,800,543 21,701,250 44,066,066 44,393,683 Small commercial 8,522,980 9,015,839 23,079,427 22,628,941 Large commercial 2,382,095 3,269,202 9,419,127 11,536,369 Industrial / Other 1,954,513 1,733,971 8,562,073 7,450,529 Transportation 24,061,877 18,522,128 97,018,813 75,172,217 - ----------------------------------------------------------------------------------------------------------------- Total system throughput 56,722,008 54,242,390 182,145,506 161,181,739 ================================================================================================================= HEATING DEGREE DAY COMPARISON - ----------------------------------------------------------------------------------------------------------------- Actual 1,113 1,262 2,289 2,363 Ten year average 1,277 1,317 2,346 2,407 ================================================================================================================= /TABLE 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. SOUTHWEST GAS CORPORATION /s/ Edward A. Janov _______________________________________ Edward A. Janov Controller and Chief Accounting Officer Date: April 17, 1995