LAS VEGAS, Nov. 7, 2017 /PRNewswire/ -- Southwest Gas
Holdings, Inc. (NYSE: SWX) announced consolidated earnings of
$0.21 per basic share for the
third quarter of 2017, a $0.16 increase from consolidated earnings of
$0.05 per basic share for the
third quarter of 2016. Consolidated net income was
$10.2 million for the third quarter
of 2017, compared to consolidated net income of $2.5 million for the third quarter of
2016. The natural gas segment experienced a net loss of
$4 million in the third quarter of 2017 compared to net loss
of $12.4 million in the third
quarter of 2016, while the construction services segment had net
income of $14.3 million in the
current quarter compared to net income of $14.9 million in the third 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 pleased to report
earnings per share of $0.21 for the
third quarter of 2017. Gas segment results improved
$8 million between quarters due to
higher operating margin and lower depreciation expense associated
with the Arizona general rate case
settlement, which was effective in April 2017. Our
construction services subsidiary also turned in a solid quarter
with earnings only slightly below last year's record results."
"In early November, our natural gas segment achieved a major
milestone. We now proudly deliver natural gas to two million
homes and businesses throughout Arizona, Nevada, and California. This achievement
holds great significance for us. When our company was founded
in 1931, no one dreamed we would serve so many. Over the
decades, the population in our service territories has grown and we
also made a few strategic acquisitions along the way, adding to our
customer base. Today, we enjoy a reputation built on
operational excellence and the trust of our customers, which we
never take for granted. As we look forward to the future, we
will continue to work hard to emphasize our customers' safety and
their service satisfaction, as well as the value we provide to our
shareholders."
For the twelve months ended September 30,
2017, consolidated net income was $162.6 million, or $3.42 per basic share, compared to
$153 million, or $3.22 per
basic share, for the twelve-month period ended September 30,
2016. The current twelve-month period includes $8.8 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 $7.5
million, or $0.16 per
share. Natural gas segment net income was $134.3 million in the current twelve-month
period and $119.8 million in the
prior-year period. Construction services segment net income
was $29.0 million in the current
twelve-month period and $33.1 million in the prior-year period.
Natural Gas Operations Segment Results
Third Quarter
Operating margin increased $6 million between
quarters. Rate relief in the Arizona and California jurisdictions provided $4 million in operating margin. An
additional $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 expense was relatively flat between
quarters. Decreases in employee-related benefit costs more
than offset increases in other general costs. Despite a 5%
increase in average gas plant in service, depreciation decreased
$10.2 million between quarters
primarily due to reduced depreciation rates in Arizona, a result of the recently effective
Arizona rate case. Property
taxes increased $1.6 million due to
additional plant in service and increased property taxes in
Arizona.
Other income and deductions increased $560,000 between quarters primarily due to an
increase in the equity portion of the allowance for funds used
during construction ("AFUDC") associated with higher construction
expenditures, partially offset by a decline between quarters in
income from COLI policies. Net interest deductions increased
$1.1 million between quarters
primarily due to the issuance of $300 million of senior notes
during the third quarter of 2016, 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 $26 million between periods
including a combined $13 million of
rate relief in the Arizona and
California jurisdictions, as well
as Paiute Pipeline Company. Customer growth provided
$9 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 $4 million.
Operations and maintenance expenses increased $12.9 million, or 3%, between periods
primarily due to general cost increases, partially offset by lower
pension expense. Approximately $5.6 million of the incremental costs
recognized were associated with the amount and timing of employee
incentive plan grants (including accelerated recognition for
retirement-eligible employees). Depreciation decreased
$15.9 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 $4.4 million
between periods primarily due to the new plant additions and
increased property taxes in Arizona.
Other income increased $693,000
between periods primarily due to $8.8
million of COLI cash surrender value increases in the
current twelve-month period compared to $7.5
million in the prior comparative period. COLI amounts
in each period were greater than expected. Net interest
deductions increased $4.3 million between periods, resulting from
the issuance of $300 million in senior notes during the third
quarter of 2016, 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 period.
Construction Services Segment Results
Third Quarter
Revenues increased $40.3 million,
or 12%, in the third quarter of 2017 when compared to the
prior-year quarter primarily due to an increase in pipe replacement
work with existing customers. A significant portion of the increase
relates to bid jobs that are expected to be substantially complete
by year end.
Construction expenses increased $42 million, or 14%,
between quarters due to additional pipe replacement work.
Results were negatively impacted by higher construction costs for a
water pipe replacement project, for which Centuri has requested
increased cost recovery. No additional work orders will be
accepted on the project pending resolution of Centuri's
request. Gains on sale of equipment (reflected as an offset
to construction expenses) were approximately $25,000 and $1.4 million for the third quarters of 2017
and 2016, respectively.
Depreciation and amortization decreased $1.1 million between quarters, primarily due to a
$2 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 $45.6 million,
or 4%, in the current twelve-month period compared to the
prior-year period primarily due to additional pipe replacement work
for existing customers.
Construction expenses increased $63.9 million, or 6% between periods, due to
additional pipe replacement work, higher labor costs experienced
due to changes in the mix of work with existing customers, and
higher operating expenses to support increased growth in
operations. The logistics surrounding the timing and length
of a temporary work stoppage with a significant customer during the
first six months of 2017 and higher labor costs incurred to
complete work during inclement weather conditions in the first
quarter of 2017 resulted in costs disproportionate to
revenues. In addition, results were negatively impacted by
higher construction and start-up costs related to a water pipe
replacement project, for which Centuri has requested increased cost
recovery. Gains on sale of equipment (reflected as an offset
to construction expenses) were $4.5 million and $4.2 million for the twelve-month periods
ended September 30, 2017 and 2016,
respectively.
Depreciation and amortization decreased $10.6 million between the current and
prior-year periods primarily due to an $11.1
million reduction associated with the extension of the
estimated useful lives of certain depreciable equipment over the
last twelve months, partially offset by an increase in depreciation
for additional equipment purchased to support the growing volume of
work being performed.
Outlook for 2017 – 3rd 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 nearly 3% 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
(5% to 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 12% to 14% as
compared to the prior year.
- Net interest deductions for 2017 are expected to increase by
$2 million to $3 million as compared
to the prior year due to higher short-term interest rates and
higher debt outstanding.
- 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 3% to 5% greater than 2016 levels.
- Operating income is expected to be nearly 5% of revenues.
- Based on the current interest rate environment, net interest
deductions for 2017 are expected to be approximately $7.5 million.
- Changes in foreign exchange rates could influence results.
Southwest Gas Holdings has two business segments:
Southwest Gas Corporation provides natural gas service to 2
million 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 – 3rd
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
SEPTEMBER 30,
|
|
2017
|
|
2016
|
|
|
|
|
|
Consolidated
Operating Revenues
|
|
$
593,153
|
|
$
539,969
|
|
|
|
|
|
Net Income Applicable
to Southwest Gas Holdings
|
|
$
10,204
|
|
$
2,472
|
|
|
|
|
|
Average Number of
Common Shares Outstanding
|
|
47,628
|
|
47,481
|
|
|
|
|
|
Basic Earnings Per
Share
|
|
$
0.21
|
|
$
0.05
|
|
|
|
|
|
Diluted Earnings Per
Share
|
|
$
0.21
|
|
$
0.05
|
|
|
|
|
|
Natural Gas Segment
Revenues
|
|
$
213,059
|
|
$
200,179
|
Net Cost of Gas
Sold
|
|
45,539
|
|
39,056
|
Operating
Margin
|
|
$
167,520
|
|
$
161,123
|
|
|
|
|
|
NINE MONTHS ENDED
SEPTEMBER 30,
|
|
2017
|
|
2016
|
|
|
|
|
|
Consolidated
Operating Revenues
|
|
$
1,808,359
|
|
$
1,818,965
|
|
|
|
|
|
Net Income Applicable
to Southwest Gas Holdings
|
|
$
97,376
|
|
$
86,861
|
|
|
|
|
|
Average Number of
Common Shares Outstanding
|
|
47,577
|
|
47,464
|
|
|
|
|
|
Basic Earnings Per
Share
|
|
$
2.05
|
|
$
1.83
|
|
|
|
|
|
Diluted Earnings Per
Share
|
|
$
2.03
|
|
$
1.82
|
|
|
|
|
|
Natural Gas Segment
Revenues
|
|
$
935,823
|
|
$
980,927
|
Net Cost of Gas
Sold
|
|
261,839
|
|
324,072
|
Operating
Margin
|
|
$
673,984
|
|
$
656,855
|
|
|
|
|
|
TWELVE MONTHS
ENDED SEPTEMBER 30,
|
|
2017
|
|
2016
|
|
|
|
|
|
Consolidated
Operating Revenues
|
|
$
2,449,884
|
|
$
2,504,370
|
|
|
|
|
|
Net Income Applicable
to Southwest Gas Holdings
|
|
$
162,556
|
|
$
152,980
|
|
|
|
|
|
Average Number of
Common Shares Outstanding
|
|
47,553
|
|
47,442
|
|
|
|
|
|
Basic Earnings Per
Share
|
|
$
3.42
|
|
$
3.22
|
|
|
|
|
|
Diluted Earnings Per
Share
|
|
$
3.39
|
|
$
3.20
|
|
|
|
|
|
Natural Gas Segment
Revenues
|
|
$
1,276,308
|
|
$
1,376,388
|
Net Cost of Gas
Sold
|
|
334,888
|
|
460,836
|
Operating
Margin
|
|
$
941,420
|
|
$
915,552
|
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SOURCE Southwest Gas Holdings, Inc.