LAS VEGAS, Aug. 7, 2017 /PRNewswire/ -- Southwest Gas
Holdings, Inc. (NYSE: SWX) announced consolidated earnings of
$0.38 per basic share for the
second quarter of 2017, a $0.19 increase from consolidated earnings of
$0.19 per basic share for the
second quarter of 2016. Consolidated net income was
$17.9 million for the second quarter
of 2017, compared to consolidated net income of $8.9 million for the second quarter of
2016. The natural gas segment had net income of $9.5 million in the second quarter of 2017
compared to net income of $2.4 million in the second quarter of 2016,
while the construction services segment had net income of
$8.7 million in the current
quarter compared to net income of $6.6 million in the second quarter of
2016. Due to the seasonal nature of the Company's businesses,
results for quarterly periods are not generally indicative of
earnings for a complete twelve-month period.
Commenting on Southwest Gas Holdings' performance and outlook,
John P. Hester, President and
Chief Executive Officer, said: "We are very pleased to
report earnings per share of $0.38
for the second quarter of 2017, doubling the earnings of the
prior-year quarter. Both of our operating segments reported
improved quarterly results compared to the prior year. Gas
segment operating results increased over $7
million between quarters, a product of improved operating
margin and lower depreciation expense due to the Arizona general rate case settlement,
effective April 2017. Earnings from our construction services
segment increased $2.1 million
compared to the prior year, as workloads in all of our operating
areas began picking up momentum."
"Looking to the second half of the year, we remain optimistic
about both operating segment prospects. Our construction
segment has moved into its traditional peak construction season,
while the gas segment will benefit from lower depreciation expense,
customer growth, and impacts of our various regulatory
mechanisms."
For the twelve months ended June 30,
2017, consolidated net income was $154.8 million, or $3.26 per basic share, compared to
$145.8 million, or $3.08 per basic share, for the twelve-month
period ended June 30, 2016. The
current twelve-month period includes $9 million, or
$0.19 per share, in other income
due to increases in the cash surrender values of company-owned life
insurance ("COLI") policies, while the prior-year period included a
COLI-related increase of $1.3
million, or $0.03 per
share. Natural gas segment net income was $125.9 million in the current twelve-month
period and $113.3 million in the
prior-year period. Construction services segment net income
was $29.6 million in the current
twelve-month period and $32.5 million
in the prior-year period.
Natural Gas Operations Segment Results
Second Quarter
Operating margin increased $7 million between
quarters. Rate relief in the Arizona and California jurisdictions provided $5 million in operating margin.
Approximately $2 million was
attributable to customer growth, as 32,000 net new customers were
added during the last twelve months.
Operating margin is a financial measure defined by management
(natural gas operating revenues less the net cost of gas sold) and
is, therefore, considered a non-GAAP measure. Management uses
this financial measure because natural gas operating revenues
include the net cost of gas sold, which is a tracked cost that is
passed through to customers without markup under purchased gas
adjustment ("PGA") mechanisms. Fluctuations in the net cost
of gas sold impact revenues on a dollar-for-dollar basis, but do
not impact operating margin or operating income. Management
believes operating margin provides useful and relevant information
necessary to analyze Southwest's financial performance in a
rate-regulated environment.
Operations and maintenance expenses increased $3.8 million, or 4%, between quarters
primarily due to higher employee-related expenses and general cost
increases. Despite a 5% increase in average gas plant in
service, depreciation decreased $11 million between quarters
primarily due to reduced depreciation rates in Arizona, a result of the recently effective
Arizona rate case. Property
taxes increased $1.5 million due to
additional plant in service and increased property taxes in
Arizona.
Other income and deductions decreased $384,000 between quarters primarily due to cash
surrender values of COLI policies that increased $1.9 million in the current quarter, while
the prior-year quarter included $2.2
million in COLI-related income. Net interest
deductions increased $430,000 between
quarters primarily due to the third quarter 2016 issuance of
$300 million of senior notes, partially offset by reductions
associated with various debt redemptions during the past twelve
months and lower interest expense associated with PGA balances as
compared to the prior-year quarter.
Twelve Months to Date
Operating margin increased $25 million between periods
including a combined $11 million of
rate relief in the Arizona and
California jurisdictions, as well
as Paiute Pipeline Company. Customer growth provided
$8 million in operating margin.
Operating margin associated with recoveries of regulatory assets,
infrastructure replacement mechanisms, customers outside the
decoupling mechanisms, and other miscellaneous revenues
collectively improved $6 million.
Operations and maintenance expenses increased $15.5 million, or 4%, between periods
primarily due to general cost increases and higher employee-related
expenses. In addition, expenses for pipeline integrity
management and damage prevention programs increased $1 million
on a combined basis. Depreciation decreased $1.9 million between periods as the impact
of a 6% increase in average gas plant in service was more than
offset by reduced depreciation rates in Arizona, effective April 2017. Property
taxes increased $3.7 million between
periods primarily due to the new plant additions.
Other income increased $6.2 million between periods primarily due
to $9 million of COLI cash surrender
value increases in the current twelve-month period compared to
$1.3 million in the prior
period. Net interest deductions increased $3.4 million between periods, resulting from
the third quarter 2016 issuance of $300 million in senior
notes, partially offset by reductions associated with various debt
redemptions during the past twelve months.
Construction Services Segment Results
Second Quarter
Revenues increased $8.2 million,
or 3%, in the second quarter of 2017 when compared to the
prior-year quarter primarily due to an increase in pipe replacement
work with existing customers, partially offset by a decrease in
revenues associated with a temporary work stoppage by a significant
customer which began in the first quarter of 2017 and continued
through part of the second quarter of 2017. The suspension of
work resulted in a $15.8 million
reduction in revenue, compared to the prior-year quarter, and a
$100,000 pre-tax loss in the second
quarter of 2017.
Construction expenses increased $8.1 million, or 3%, between quarters due to
additional pipe replacement work and higher labor costs related to
the temporary work stoppage. Gains on sale of equipment
(reflected as an offset to construction expenses) were
approximately $1.1 million and
$1.4 million for the second
quarters of 2017 and 2016, respectively.
Depreciation and amortization decreased $3.5 million between quarters, primarily due to a
$2.7 million reduction
associated with the extension of the estimated useful lives of
certain depreciable equipment during the past 12 months.
Twelve Months to Date
Revenues increased $59.1 million,
or 6%, in the current twelve-month period compared to the
prior-year period primarily due to additional pipe replacement work
for existing customers. Additionally, during the fourth
quarter of 2016, work began on a multi-year water pipe replacement
program for a new municipal customer.
Construction expenses increased $75.7 million, or 8% between periods, due to
additional pipe replacement work, higher labor costs experienced
due to changes in the mix of work with existing customers, start-up
costs associated with new customer contracts, and increased
operating expenses to support increased growth in operations.
Additionally, the logistics surrounding the timing and length of a
temporary work stoppage with a significant customer during the
first six months of 2017 resulted in costs disproportionate to
revenues.
Depreciation and amortization decreased $9.9 million between the current and
prior-year periods primarily due to an $11.5
million reduction associated with the extension of the
estimated useful lives of certain depreciable equipment over the
last twelve months.
Net interest deductions decreased $441,000 between periods primarily due to lower
interest rates and lower average outstanding borrowings.
Outlook for 2017 – 2nd Quarter 2017
Update
Natural Gas Segment:
- Operating margin for 2017 is anticipated to benefit from new
rates associated with the Arizona
general rate case, customer growth (similar to 2016),
infrastructure tracker mechanisms, expansion projects, and
California attrition.
Combined, these items are expected to produce approximately 2% in
incremental margin.
- Operations and maintenance expense is expected to track
generally with inflationary changes and customer growth
rates. Despite the anticipated growth in gas plant in service
(approximately 6%), depreciation and general taxes combined are
expected to decrease due to the depreciation rate reduction
approved in our Arizona general
rate case settlement.
- Operating income is expected to increase by 11% to 13% as
compared to the prior year.
- Net interest deductions for 2017 are expected to increase about
$2 million as compared to the prior
year due to higher short-term interest rates and interest on PGA
balances.
- Changes in cash surrender values of COLI policies will continue
to be subject to volatility. Management generally anticipates
longer term normal increases in COLI cash surrender values to range
from $3 million to $5 million on an annual
basis.
- Capital expenditures in 2017 are estimated to be approximately
$570 million, in support of customer growth, system
improvements, and accelerated pipe replacement programs.
Construction Services Segment:
- Centuri has a strong base of large utility clients (many with
multi-year pipe replacement programs) that are expected to sustain,
and over time, grow its business. Revenues for 2017 are
anticipated to be 2% to 5% greater than 2016 levels.
- Operating income is expected to be approximately 5% of
revenues.
- Based on the current interest rate environment, net interest
deductions for 2017 are expected to be approximately
$7 million.
- These collective expectations are before consideration of the
portion of earnings attributable to the noncontrolling
interests. Additionally, changes in foreign exchange rates
could influence results.
Southwest Gas Holdings has two business segments:
Southwest Gas Corporation provides natural gas service to
1,994,000 customers in Arizona,
Nevada, and California.
Centuri Construction Group, Inc. is a comprehensive construction
services enterprise dedicated to meeting the growing demands of
North American utilities, energy, and industrial markets.
Centuri derives revenue from installation, replacement, repair, and
maintenance of energy distribution systems, and developing
industrial construction solutions.
Forward-Looking Statements:
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Such statements include, without limitation, statements
regarding Southwest Gas Holdings, Inc. (the "Company") and the
Company's expectations, hopes or intentions regarding the future.
These forward looking statements can often be identified by the use
of words such as "will", "predict", "continue", "forecast",
"expect", "believe", "anticipate", "outlook", "could", "target",
"project", "intend", "plan", "seek", "estimate", "should", "may"
and "assume", as well as variations of such words and similar
expressions referring to the future, and include (without
limitation) statements regarding expectations of continuing growth
in 2017, the anticipated effects on the Company of the recently
approved Arizona general rate case
settlement, and the Company's optimism about the future. In
addition, the statements under the heading "Outlook for 2017 –
2nd Quarter 2017 Update" that are not historic,
constitute forward-looking statements. 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 timing and amount of rate relief, changes
in rate design, customer growth rates, the effects of
regulation/deregulation, the impacts of construction activity at
Centuri, future earnings trends, seasonal patterns, and the impacts
of stock market volatility. In addition, the Company can
provide no assurance that its discussions about future operating
margin, operations and maintenance expenses, operating income,
depreciation and general taxes, COLI cash surrender values,
financing expenses, and capital expenditures of the natural gas
segment will occur. Likewise, the Company can provide no
assurance that discussions regarding construction services segment
revenues, operating income, and net interest deductions will
transpire. Factors that could cause actual results to differ also
include (without limitation) those discussed under the heading
"Risk Factors" in Southwest Gas Corporation's most recent Annual
Report on Form 10-K and in the Company's and Southwest Gas
Corporation's current and periodic reports filed from time to time
with the SEC. The statements in this press release are made
as of the date of this press release, even if subsequently made
available by the Company on its Web site or otherwise. The
Company does not assume any obligation to update the
forward-looking statements provided to reflect events that occur or
circumstances that exist after the date on which they were
made.
SOUTHWEST GAS
HOLDINGS, INC. CONSOLIDATED EARNINGS DIGEST
|
|
(In thousands,
except per share amounts)
|
|
QUARTER ENDED JUNE
30,
|
|
2017
|
|
2016
|
|
|
|
|
|
Consolidated
Operating Revenues
|
|
$
560,469
|
|
$
547,748
|
|
|
|
|
|
Net Income Applicable
to Southwest Gas Holdings
|
|
$
17,864
|
|
$
8,943
|
|
|
|
|
|
Average Number of
Common Shares Outstanding
|
|
47,571
|
|
47,473
|
|
|
|
|
|
Basic Earnings Per
Share
|
|
$
0.38
|
|
$
0.19
|
|
|
|
|
|
Diluted Earnings Per
Share
|
|
$
0.37
|
|
$
0.19
|
|
|
|
|
|
Natural Gas Segment
Revenues
|
|
$
260,162
|
|
$
255,648
|
Net Cost of Gas
Sold
|
|
69,421
|
|
71,416
|
Operating
Margin
|
|
$
190,741
|
|
$
184,232
|
|
|
|
|
|
SIX MONTHS ENDED
JUNE 30,
|
|
2017
|
|
2016
|
|
|
|
|
|
Consolidated
Operating Revenues
|
|
$
1,215,206
|
|
$
1,278,996
|
|
|
|
|
|
Net Income Applicable
to Southwest Gas Holdings
|
|
$
87,172
|
|
$
84,389
|
|
|
|
|
|
Average Number of
Common Shares Outstanding
|
|
47,550
|
|
47,455
|
|
|
|
|
|
Basic Earnings Per
Share
|
|
$
1.83
|
|
$
1.78
|
|
|
|
|
|
Diluted Earnings Per
Share
|
|
$
1.82
|
|
$
1.77
|
|
|
|
|
|
Natural Gas Segment
Revenues
|
|
$
722,764
|
|
$
780,748
|
Net Cost of Gas
Sold
|
|
216,300
|
|
285,016
|
Operating
Margin
|
|
$
506,464
|
|
$
495,732
|
|
|
|
|
|
TWELVE MONTHS
ENDED JUNE 30,
|
|
2017
|
|
2016
|
|
|
|
|
|
Consolidated
Operating Revenues
|
|
$
2,396,700
|
|
$
2,469,797
|
|
|
|
|
|
Net Income Applicable
to Southwest Gas Holdings
|
|
$
154,824
|
|
$
145,774
|
|
|
|
|
|
Average Number of
Common Shares Outstanding
|
|
47,516
|
|
47,347
|
|
|
|
|
|
Basic Earnings Per
Share
|
|
$
3.26
|
|
$
3.08
|
|
|
|
|
|
Diluted Earnings Per
Share
|
|
$
3.24
|
|
$
3.06
|
|
|
|
|
|
Natural Gas Segment
Revenues
|
|
$
1,263,428
|
|
$
1,395,629
|
Net Cost of Gas
Sold
|
|
328,405
|
|
486,048
|
Operating
Margin
|
|
$
935,023
|
|
$
909,581
|
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SOURCE Southwest Gas Holdings, Inc.