LAS VEGAS, Aug. 5, 2021 /PRNewswire/ -- Southwest Gas
Holdings, Inc. (NYSE: SWX) announced consolidated earnings of
$0.43 per diluted share for the
second quarter of 2021, a $0.25
decrease from consolidated earnings of $0.68 per diluted share for the second
quarter of 2020. Consolidated current-quarter results include
$3.1 million, or $0.05 per share, in other income due to increases
in the cash surrender value of company-owned life insurance
("COLI") policies, while the prior-year quarter included
$12 million of COLI-related income, or $0.22 per share. Consolidated net income was
$25.1 million for the second
quarter of 2021, compared to consolidated net income of
$38 million for the second quarter of 2020. The natural gas
segment had net income of $11.4 million for the second quarter of 2021
compared to net income of $11.9 million for the second quarter of
2020, while the utility infrastructure services segment had net
income of $15.1 million in the
second quarter of 2021 compared to net income of $26.3 million in the second quarter of 2020.
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 the performance and outlook of Southwest Gas
Holdings, John P. Hester, President
and Chief Executive Officer, said: "We are pleased that many
communities we serve have continued to experience solid growth
throughout these turbulent economic times. As new companies move in
and industries expand, good incremental jobs are being added to our
local economies. This further encourages migration from other parts
of the country, increasing demand for energy and creating growth
opportunities for our Company. We added 37,000 new utility
customers over the past twelve months and continue to connect new
customers to our expanded service territories in Mesquite and Spring
Creek, Nevada.
"We are excited about the growth we also see in our
infrastructure services business. Over the past twelve months,
Centuri reached a new level of revenues - $2 billion. In June,
we signed an agreement to purchase Riggs
Distler & Company, Inc., which will expand our
infrastructure services footprint in the Northeast and Mid-Atlantic
regions of the country. This transformational acquisition brings
exciting growth opportunities in 5G telecom and renewable power
services; and expands our service offerings to current combination
utility customers."
For the twelve months ended June 30, 2021,
consolidated net income was $264.2 million, or $4.60 per diluted share, compared to
$207.6 million, or $3.76 per diluted share, for the
twelve-month period ended June 30,
2020. The current twelve-month period includes
an $18.5 million, or $0.32
per share, increase in the cash surrender values of COLI policies,
while the prior-year period included COLI-related income of
$2.9 million, or $0.05 per share. Natural gas segment net
income was $193.7 million in the
current twelve–month period compared to $152 million in the
prior-year period. Utility infrastructure services segment net
income was $73.1 million in the
current twelve-month period and $57.6 million in the prior-year
period.
Natural Gas Operations Segment Results
Second Quarter
Operating margin increased $21 million between quarters.
Approximately $2 million of incremental margin was
attributable to customer growth from 37,000 first-time meter sets
during the last twelve months, while rate relief added
approximately $15 million of margin. Also contributing to the
increase were late fees that were $1.8 million greater in the current quarter.
A moratorium on such fees commenced in all of our territories in
March 2020; however, resumption of
the assessments in Arizona and
Nevada occurred in April 2021. Amounts collected from and returned
to customers associated with regulatory account balances, as well
as differences in miscellaneous revenue and margin from customers
outside the decoupling mechanisms, also impacted the variance
between quarters.
Operations and maintenance expense increased $3.8 million, or 4%, between quarters
primarily due to higher customer service-related costs, increased
expenditures for pipeline damage prevention programs, and an
increase in the service-related component of employee pension cost
and other benefits. Depreciation and amortization increased
$4.4 million, or 8%, between
quarters due to a $549 million, or 7%, increase in average gas
plant in service. Amortization related to regulatory account
recoveries increased approximately $1.1 million between quarters. The increase
in gas plant was attributable to pipeline capacity reinforcement
work, franchise requirements, scheduled pipe replacement
activities, and new infrastructure, as well as expenditures toward
our new customer service system, which was placed in production in
May 2021. Taxes other than income
taxes increased $4 million between quarters due to an
increase in Arizona property
taxes.
Other income decreased $9 million between quarters
primarily due to a decline in income associated with COLI policies.
The current quarter reflects a $3.1 million increase in COLI policy cash
surrender values and recognized death benefits, while the
prior-year quarter reflected a $12 million increase. Amounts
associated with the allowance for funds used during construction
("AFUDC") are also lower in the current quarter. Offsetting these
combined impacts is a decrease in the non-service-related
components of employee pension and other postretirement benefit
costs between quarters.
Income tax expense in both quarters includes the amortization of
excess accumulated deferred income tax ("EADIT") balances and the
impacts of COLI cash surrender value increases, which are
recognized without tax consequences.
Twelve Months to Date
Operating margin increased $54 million between the
comparative twelve-month periods ended June 30, 2021 and
2020. Customer growth provided approximately $14 million,
and combined rate relief provided $39 million of incremental
operating margin. Offsetting these impacts was a reduction in
late fees ($3.8 million) due to
the pandemic-period moratorium on these fees from March 2020 through April
2021. Regulatory account balance surcharges impacted both
periods, in addition to margin from customers outside the
decoupling mechanisms.
Operations and maintenance expense decreased $803,000
between periods. Lower travel and in-person training costs in the
COVID-19 environment and other cost saving initiatives by
management more than offset higher levels of service-related
pension and post-retirement benefit costs, expenditures for
pipeline damage prevention programs associated with a growing
infrastructure and customer base, and information technology and
customer-related costs. Depreciation and amortization expense
increased $17.1 million, or 8%,
between periods due to a $604 million, or 8%, increase in
average gas plant in service since the corresponding period in the
prior year and a $1.2 million
increase in regulatory amortization. Taxes other than income taxes
increased $9 million between periods primarily due to an
increase in property taxes in Arizona.
Other income increased $16.2 million between comparative
twelve-month periods, reflective of the $18.5 million increase in COLI policy cash
surrender values and recognized death benefits in the current
period, while the prior-year period reflected a $2.9 million increase in values.
Income tax expense in both periods reflects that COLI results
are recognized without tax consequences, and the impacts of
amortization of EADIT balances.
Utility Infrastructure Services Segment
Results
Second Quarter
Utility infrastructure revenues increased $33.8 million in the second quarter of 2021
when compared to the prior-year quarter, primarily due to increased
work under gas infrastructure blanket and bid contracts with
certain customers in the central and eastern U.S. regions and
Canada. Revenues from electric
infrastructure services increased $2.4 million in the second quarter of 2021
when compared to the prior-year quarter, including an offsetting
reduction in emergency restoration storm support services of
$4 million due to the unpredictable nature of weather-related
events. Storm restoration work typically generates a higher profit
margin than core infrastructure services, due to improved operating
efficiencies related to equipment utilization and absorption of
fixed costs. Partially offsetting the increased revenues in the
above noted regions was reduced work with two significant customers
during the second quarter of 2021 (totaling $27 million), due
to timing and mix of projects under each customer's multi-year
capital spending programs.
Utility infrastructure services expenses increased $48.4 million between quarters, primarily
due to costs to complete gas infrastructure work. The significant
reductions in revenue from major customers, as discussed above, had
an unfavorable impact on profit margins due to reduced operating
efficiencies from equipment and facility utilization and
under-absorption of other fixed costs. The prior-year period was
favorably impacted by certain customers' response to COVID-19,
which allowed for an increase in main line replacement work as
compared to service-line related work, resulting in greater
operating efficiencies. Higher fuel costs and equipment rental
expense were also incurred due to the mix of work and in support of
growth in our electric infrastructure business. Centuri
recognized $1.8 million in wage and rent subsidies from
the Canadian government amidst the continuing COVID-19 environment
during the second quarter of 2021, compared to $3.4 million in subsidies received in the
prior-year quarter. These subsidies were recorded as a reduction in
utility infrastructure services expense. Also included in utility
infrastructure services expenses were general and administrative
costs, which increased $1 million in 2021 compared to 2020
(including approximately $600,000 in
professional fees related to Centuri's pending acquisition of
Riggs Distler & Company).
Depreciation and amortization increased $1.2 million between
quarters, attributable to equipment purchased to support the
growing volume of infrastructure work. Depreciation expense,
relative to the revenues recorded, was generally consistent during
the second quarter of 2021 compared to the prior-year
quarter.
Net interest deductions decreased $600,000 between periods due to lower incremental
borrowing rates associated with decreased outstanding borrowings
under Centuri's $590 million secured revolving credit and
term loan facility.
Twelve Months to Date
Utility infrastructure revenues
increased $200.5 million, or 11%, in the current
twelve-month period when compared to the prior-year period,
primarily due to incremental electric infrastructure revenues of
$134.2 million from expansion of
work with existing customers and securing work with new customers.
Included in the incremental electric infrastructure revenues during
the twelve-month period of 2021 was $86.5 million from emergency restoration
services performed by Linetec following hurricane, tornado, and
other storm damage to customers' above-ground utility
infrastructure in and around the Gulf Coast and eastern regions of
the U.S., as compared to $13.6 million in similar services during the
twelve-month period in 2020. Centuri's revenues derived from
storm-related services vary from period to period due to the
unpredictable nature of weather-related events. The remaining
increase in revenue was attributable to continued growth with
existing gas infrastructure customers under master service and bid
agreements.
Utility infrastructure services expenses increased
$174 million between periods, largely due to incremental costs
related to electric infrastructure work of $87.2 million, including costs associated
with storm restoration work, and costs necessary for the completion
of additional gas infrastructure work. Also included in utility
infrastructure services expenses were general and administrative
costs, which increased $19.5 million during the twelve-month period
in 2021, when compared to 2020, due to higher payroll and operating
costs associated with continued growth of the business and higher
profit-based incentive compensation. Offsetting these increases
were lower insurance costs from favorable claims experience under
Centuri's self-insurance programs. Gains on sale of equipment
(reflected as an offset to utility infrastructure services
expenses) were $5.6 million and
$4.9 million for the
twelve-month periods of 2021 and 2020, respectively.
Depreciation and amortization expense increased $6.1 million between periods primarily due
to incremental depreciation ($4.3 million) related to assets supporting
electric infrastructure services. The remaining increase is
attributable to property and equipment purchased to support the
growing volume of work being performed.
Net interest deductions decreased $5.1 million between periods primarily due
to lower incremental borrowing rates associated with decreased
outstanding borrowings under Centuri's $590 million secured
revolving credit and term loan facility.
Outlook for 2021
Management affirms its estimated 2021 diluted earnings per share
to be between $4.00 and $4.20. These expectations exclude results or
costs that would be experienced upon Centuri completing its planned
acquisition of Riggs Distler &
Company, Inc.
Highlights of 2021 expectations (excluding the planned
acquisition) are as follows:
Natural Gas Operations Segment:
- Operating margin for 2021 is anticipated to benefit from
customer growth (1.7%), rate relief in all three states in which we
operate, expansion projects, and infrastructure tracker mechanisms.
Combined, these items are expected to produce an increase in
operating margin of 6% to 8%.
- Total pension costs are expected to be relatively flat compared
to 2020, but will be reflected as an increase in operations and
maintenance cost of about $6 million,
with a comparable decrease to other expense (associated with
non-service-related pension costs).
- Operating income is expected to increase 3% to 5%.
- COLI earnings of $3 million to
$5 million are included for full-year
2021 projections.
- Capital expenditures in 2021 are estimated at approximately
$700 million, in support of customer
growth, system improvements, and pipe replacement programs.
Utility Infrastructure Services Segment (excluding the
planned acquisition):
- Centuri's revenues for 2021 are expected to be 1% to 4% greater
than the record 2020 amount (which included $82 million of emergency storm restoration
services).
- Operating income is expected to be approximately 5.3% to 5.8%
of revenues.
- Interest expense is expected to be $7
million to $8 million.
- Net income expectations reflect earnings attributable to
Southwest Gas Holdings, net of earnings attributable to
noncontrolling interests (estimated between $5 million and $6
million). Changes in Canadian exchange rates could influence
results.
Southwest Gas Holdings has two business segments:
Southwest Gas Corporation provides safe and reliable natural gas
service to over 2 million customers in Arizona, Nevada, and California.
Centuri Group, Inc. is a comprehensive utility infrastructure
services enterprise dedicated to delivering a diverse array of
solutions to North America's gas
and electric providers. Centuri derives revenues primarily from
installation, replacement, repair, and maintenance of energy
distribution systems.
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 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 2021. In
addition, the statements under the heading "Outlook for 2021" 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, tax reform and related regulatory
decisions, 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, operating income,
pension costs, COLI results, and capital expenditures of the
natural gas segment will occur. Likewise, the Company can provide
no assurance that discussions regarding utility infrastructure
services segment revenues, operating income as a percentage of
revenues, interest expense, and noncontrolling interest amounts
will transpire, nor assurance regarding acquisitions or their
impacts, including management's plans related thereto, such as that
currently planned in regard to Riggs. Because of these and other
factors, the Company can provide no assurances that estimates of
2021 earnings per share will be realized. Factors that could cause
actual results to differ also include (without limitation) those
discussed under the heading "Risk Factors" in Southwest Gas
Holdings, Inc.'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.
Non-GAAP Measures. Southwest recognizes
operating revenues from the distribution and transportation of
natural gas (and related services) to customers. Gas cost is a
tracked cost, which is passed through to customers without markup
under purchased gas adjustment ("PGA") mechanisms, impacting
revenues and net cost of gas sold on a dollar-for-dollar basis,
thereby having no impact on Southwest's profitability. Therefore,
management routinely uses operating margin, defined as operating
revenues less the net cost of gas sold, in its analysis of
Southwest's financial performance. Operating margin also forms a
basis for Southwest's various regulatory decoupling mechanisms.
Operating margin is not, however, specifically defined in
accounting principles generally accepted in the United States ("U.S. GAAP") and is
considered a non-GAAP measure. Management believes supplying
information regarding operating margin provides investors and other
interested parties with useful and relevant information to analyze
Southwest's financial performance in a rate-regulated environment.
(Refer to the Southwest Gas Holdings, Inc. Consolidated Earnings
Digest for a reconciliation of revenues to operating
margin.)
SOUTHWEST GAS
HOLDINGS, INC. CONSOLIDATED EARNINGS DIGEST
|
(In thousands, except
per share amounts)
|
|
QUARTER ENDED JUNE
30,
|
|
2021
|
|
2020
|
Consolidated
Operating Revenues
|
|
$
|
821,421
|
|
|
$
|
757,247
|
|
|
|
|
|
|
Net Income applicable
to Southwest Gas Holdings
|
|
$
|
25,119
|
|
|
$
|
37,965
|
|
|
|
|
|
|
Weighted Average
Common Shares
|
|
58,607
|
|
|
55,462
|
|
|
|
|
|
|
Basic Earnings Per
Share
|
|
$
|
0.43
|
|
|
$
|
0.68
|
|
|
|
|
|
|
Diluted Earnings Per
Share
|
|
$
|
0.43
|
|
|
$
|
0.68
|
|
|
|
|
|
|
Reconciliation of
Revenue to Operating Margin (Non-GAAP measure)
|
|
|
|
|
Natural Gas Segment
Revenues
|
|
$
|
292,796
|
|
|
$
|
262,434
|
|
Less: Net Cost of Gas
Sold
|
|
76,496
|
|
|
67,473
|
|
Operating
Margin
|
|
$
|
216,300
|
|
|
$
|
194,961
|
|
|
|
|
|
|
SIX MONTHS ENDED
JUNE 30,
|
|
2021
|
|
2020
|
Consolidated
Operating Revenues
|
|
$
|
1,707,328
|
|
|
$
|
1,593,567
|
|
|
|
|
|
|
Net Income applicable
to Southwest Gas Holdings
|
|
$
|
142,412
|
|
|
$
|
110,507
|
|
|
|
|
|
|
Weighted Average
Common Shares
|
|
58,106
|
|
|
55,386
|
|
|
|
|
|
|
Basic Earnings Per
Share
|
|
$
|
2.45
|
|
|
$
|
2.00
|
|
|
|
|
|
|
Diluted Earnings Per
Share
|
|
$
|
2.45
|
|
|
$
|
1.99
|
|
|
|
|
|
|
Reconciliation of
Revenue to Operating Margin (Non-GAAP measure)
|
|
|
|
|
Natural Gas Segment
Revenues
|
|
$
|
814,728
|
|
|
$
|
765,261
|
|
Less: Net Cost of Gas
Sold
|
|
232,517
|
|
|
228,294
|
|
Operating
Margin
|
|
$
|
582,211
|
|
|
$
|
536,967
|
|
|
|
|
|
|
TWELVE MONTHS
ENDED JUNE 30,
|
|
2021
|
|
2020
|
Consolidated
Operating Revenues
|
|
$
|
3,412,634
|
|
|
$
|
3,166,934
|
|
|
|
|
|
|
Net Income applicable
to Southwest Gas Holdings
|
|
$
|
264,229
|
|
|
$
|
207,578
|
|
|
|
|
|
|
Weighted Average
Common Shares
|
|
57,348
|
|
|
55,105
|
|
|
|
|
|
|
Basic Earnings Per
Share
|
|
$
|
4.61
|
|
|
$
|
3.77
|
|
|
|
|
|
|
Diluted Earnings Per
Share
|
|
$
|
4.60
|
|
|
$
|
3.76
|
|
|
|
|
|
|
Reconciliation of
Revenue to Operating Margin (Non-GAAP measure)
|
|
|
|
|
Natural Gas Segment
Revenues
|
|
$
|
1,400,052
|
|
|
$
|
1,354,812
|
|
Less: Net Cost of Gas
Sold
|
|
347,060
|
|
|
355,672
|
|
Operating
Margin
|
|
$
|
1,052,992
|
|
|
$
|
999,140
|
|
View original content to download
multimedia:https://www.prnewswire.com/news-releases/southwest-gas-holdings-inc-announces-second-quarter-2021-earnings-301349835.html
SOURCE Southwest Gas Holdings, Inc.