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.
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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