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Southwest Gas Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 9, 2011 03:21PM
Southwest Gas Corp. (SWX) filed Quarterly Report for the period ended 2011-03-31.
Highlight of Business Operations:
Liquidity. Southwest believes its liquidity position remains strong. Southwest has a $300 million credit facility maturing in May 2012, $150 million of which is designated for working capital needs. The facility is provided through a consortium of eight major banking institutions. The facility was not used during the first quarter of 2011 and there was no balance outstanding at March 31, 2011, leaving the entire $300 million available for long-term and working capital needs. The lack of usage was primarily due to existing cash reserves and natural gas prices that were relatively stable. The current slowdown in housing construction has also allowed Southwest to fund construction expenditures primarily with internally generated cash.
Refinancing. In February 2011, the Company repaid the matured 8.375% $200 million Notes using the entire proceeds ($125 million) of the 6.1% Senior Notes (issued in February 2011) and $75 million of the total $125 million proceeds of 4.45% Senior Notes (issued in December 2010). The Company will reflect future interest expense savings due to lower interest rates obtained on the new notes.
Operating margin increased $8 million in the first quarter of 2011 compared to the first quarter of 2010. Differences in heating demand, caused primarily by weather variations, provided $6 million of the operating margin increase. While overall temperatures in both quarters were relatively normal, some unusually cold weather occurred in Arizona in early February 2011, resulting in the incremental operating margin. Rate relief in California provided $1 million of the operating margin increase. New customers contributed an incremental $1 million in operating margin as 14,000 net new customers were added during the last twelve months.
Operating margin increased $12 million between periods. Rate relief provided $9 million of the operating margin increase, consisting of $6 million in Nevada and $3 million in California. Differences in heating demand caused primarily by weather variations between periods accounted for $1 million in incremental operating margin. Customer growth contributed $2 million in operating margin.
Revenues increased $20.3 million, a 38% improvement, when compared to the same period of 2010. Revenue from replacement construction continues to be strong. During the quarter, revenue from bid projects increased and offset revenue from new construction that remained at low levels. Construction expenses increased $18 million. Gains on sale of equipment were $885,000 and $232,000 for the first quarters of 2011 and 2010, respectively.
Revenues increased $60.3 million due primarily to an increase in the volume of replacement work. Construction expenses increased $50.8 million between the twelve-month periods due primarily to the increase in replacement construction work, while depreciation expense declined $2.1 million due to the timing of equipment purchases. Gains on sale of equipment were $2.2 million and $2.5 million for the twelve-month periods of 2011 and 2010, respectively.