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Southwest Gas Corp. Reports Operating Results (10-Q)

May 07, 2010 | About:
10qk

10qk

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Southwest Gas Corp. (SWX) filed Quarterly Report for the period ended 2010-03-31.

Southwest Gas Corp. has a market cap of $1.39 billion; its shares were traded at around $30.79 with a P/E ratio of 13.3 and P/S ratio of 0.8. The dividend yield of Southwest Gas Corp. stocks is 3%. Southwest Gas Corp. had an annual average earning growth of 2.2% over the past 10 years.SWX is in the portfolios of Jim Simons of Renaissance Technologies LLC, Kenneth Fisher of Fisher Asset Management, LLC.
This is the annual revenues and earnings per share of SWX over the last 10 years. For detailed 10-year financial data and charts, go to 10-Year Financials of SWX.


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. Usage of the facility in the first quarter of 2010 was minimal. The outstanding balance at March 31 was $45 million leaving $255 million available for long-term and working capital needs. The lower usage was primarily due to improved profitability, natural gas prices that were relatively stable, and gas-cost related rate mechanisms that favorably impacted operating cash flows. In the first quarter of 2010, cash and borrowings under the credit facility were used by the Company to redeem $100 million in subordinated debentures. The current slowdown in housing construction has also allowed Southwest to fund construction expenditures primarily with internally generated cash.

Operating margin increased $23 million in the first quarter of 2010 compared to the first quarter of 2009. Differences in heating demand, caused primarily by weather variations, provided $13 million of the operating margin increase as temperatures in the current quarter were normal, while temperatures were significantly warmer than normal in the first quarter of 2009. Rate relief provided $10 million of the operating margin increase, consisting of $9 million in Nevada and $1 million in California. Customer growth had a negligible impact as 9,000 net new customers were added during the last twelve months.

Other income improved $1.3 million between quarters as the cash surrender values of COLI policies increased by $1.5 million in the first quarter of 2010 compared to a decrease of $1.6 million in the prior-year quarter, partially offset by a $1.3 million increase in costs associated with certain Arizona non-recoverable pipe replacement work.

Operating margin increased $37 million between periods. Rate relief and rate changes provided a net $18 million increase, consisting of rate relief of $16 million in Arizona, $11 million in Nevada, and $3 million in California, partially offset by a decrease of $12 million related to the return to a seasonal margin methodology in California in 2009. Differences in heating demand caused primarily by weather variations between periods resulted in a $23 million operating margin increase as warmer-than-normal temperatures were experienced during both periods (during the twelve-month period of 2010, operating margin was negatively impacted by $5 million, while the negative impact in the twelve-month period of 2009 was $28 million). Customer growth contributed $1 million in operating margin. Conservation resulting from current economic conditions and energy efficiency negatively impacted operating margin by an estimated $5 million.

Depreciation expense decreased $824,000 as a result of lower depreciation rates in the California ($3 million annualized reduction) and Nevada ($2.3 million annualized reduction) rate jurisdictions effective in January and June 2009, respectively. Average gas plant in service for the current period increased $178 million, or four percent, compared to the corresponding period a year ago.

California General Rate Cases. Effective January 2009, Southwest received general rate relief in California. The California Public Utilities Commission (“CPUC”) decision authorized an overall increase of $2.8 million in 2009 with an additional $400,000 deferred to 2010. In addition, attrition increases were approved to be effective for the years 2010-2013 of 2.95% in southern and northern California and approximately $100,000 per year for the South Lake Tahoe rate jurisdiction. In October 2009, Southwest filed for attrition increases which were approved effective January 2010 in the amount of $2.7 million (including the $400,000 previously deferred).

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