UNITED STATES Form 10-QQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended Commission File Number 1-7850 SOUTHWEST GAS CORPORATION |
California (State or other jurisdiction of incorporation or organization) 5241 Spring Mountain Road Post Office Box 98510 Las Vegas, Nevada (Address of principal executive offices) | | 88-0085720 (I.R.S. Employer Identification No.) 89193-8510 (Zip Code) |
Registrant's telephone number, including area code: (702) 876-7237 |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes |X| No |_| Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. Common Stock, $1 Par Value, |
PART I |
MARCH 31, 2003 | DECEMBER 31, 2002 | |||||||
---|---|---|---|---|---|---|---|---|
(Unaudited) | ||||||||
ASSETS | ||||||||
Utility plant: | ||||||||
Gas plant | $ | 2,830,191 | $ | 2,779,960 | ||||
Less: accumulated depreciation | (892,196 | ) | (869,908 | ) | ||||
Acquisition adjustments | 2,669 | 2,714 | ||||||
Construction work in progress | 58,086 | 66,693 | ||||||
Net utility plant | 1,998,750 | 1,979,459 | ||||||
Other property and investments | 85,595 | 87,391 | ||||||
Current assets: | ||||||||
Cash and cash equivalents | 18,871 | 19,392 | ||||||
Accounts receivable, net of allowances | 120,439 | 130,695 | ||||||
Accrued utility revenue | 36,700 | 65,073 | ||||||
Deferred income taxes | 8,453 | 3,084 | ||||||
Prepaids and other current assets | 41,515 | 43,524 | ||||||
Total current assets | 225,978 | 261,768 | ||||||
Deferred charges and other assets | 55,015 | 49,310 | ||||||
Total assets | $ | 2,365,338 | $ | 2,377,928 | ||||
CAPITALIZATION AND LIABILITIES | ||||||||
Capitalization: | ||||||||
Common stock, $1 par (authorized - 45,000,000 shares; issued | ||||||||
and outstanding - 33,558,966 and 33,289,015 shares) | $ | 35,189 | $ | 34,919 | ||||
Additional paid-in capital | 491,965 | 487,788 | ||||||
Retained earnings | 92,087 | 73,460 | ||||||
Total common equity | 619,241 | 596,167 | ||||||
Mandatorily redeemable preferred securities due 2025 | 60,000 | 60,000 | ||||||
Long-term debt, less current maturities | 1,071,682 | 1,092,148 | ||||||
Total capitalization | 1,750,923 | 1,748,315 | ||||||
Current liabilities: | ||||||||
Current maturities of long-term debt | 8,608 | 8,705 | ||||||
Short-term debt | -- | 53,000 | ||||||
Accounts payable | 79,616 | 88,309 | ||||||
Customer deposits | 36,804 | 34,313 | ||||||
Income taxes payable, net | 24,717 | 10,969 | ||||||
Accrued general taxes | 43,336 | 28,400 | ||||||
Accrued interest | 18,068 | 21,137 | ||||||
Deferred purchased gas costs | 42,146 | 26,718 | ||||||
Other current liabilities | 39,369 | 41,630 | ||||||
Total current liabilities | 292,664 | 313,181 | ||||||
Deferred income taxes and other credits: | ||||||||
Deferred income taxes and investment tax credits | 233,787 | 229,358 | ||||||
Other deferred credits | 87,964 | 87,074 | ||||||
Total deferred income taxes and other credits | 321,751 | 316,432 | ||||||
Total capitalization and liabilities | $ | 2,365,338 | $ | 2,377,928 | ||||
SEPTEMBER 30, 2003 | DECEMBER 31, 2002 | |||||||
---|---|---|---|---|---|---|---|---|
ASSETS | (Unaudited) | |||||||
Utility plant: | ||||||||
Gas plant | $ | 2,957,206 | $ | 2,779,960 | ||||
Less: accumulated depreciation | (941,068 | ) | (869,908 | ) | ||||
Acquisition adjustments, net | 2,579 | 2,714 | ||||||
Construction work in progress | 26,690 | 66,693 | ||||||
Net utility plant | 2,045,407 | 1,979,459 | ||||||
Other property and investments | 87,578 | 87,391 | ||||||
Current assets: | ||||||||
Cash and cash equivalents | 6,788 | 19,392 | ||||||
Accounts receivable, net of allowances | 72,750 | 130,695 | ||||||
Accrued utility revenue | 28,000 | 65,073 | ||||||
Income taxes receivable, net | 6,396 | -- | ||||||
Deferred income taxes | 7,982 | 3,084 | ||||||
Prepaids and other current assets | 46,413 | 43,524 | ||||||
Total current assets | 168,329 | 261,768 | ||||||
Deferred charges and other assets | 60,171 | 49,310 | ||||||
Total assets | $ | 2,361,485 | $ | 2,377,928 | ||||
CAPITALIZATION AND LIABILITIES | ||||||||
---|---|---|---|---|---|---|---|---|
Capitalization: | ||||||||
Common stock, $1 par (authorized - 45,000,000 shares; issued | ||||||||
and outstanding - 33,943,918 and 33,289,015 shares) | $ | 35,574 | $ | 34,919 | ||||
Additional paid-in capital | 503,194 | 487,788 | ||||||
Retained earnings | 56,657 | 73,460 | ||||||
Total equity | 595,425 | 596,167 | ||||||
Mandatorily redeemable preferred trust securities | -- | 60,000 | ||||||
Subordinated debentures due to Southwest Gas Capital II (Note 3) | 100,000 | -- | ||||||
Long-term debt, less current maturities | 1,104,091 | 1,092,148 | ||||||
Total capitalization | 1,799,516 | 1,748,315 | ||||||
Current liabilities: | ||||||||
Current maturities of long-term debt | 7,067 | 8,705 | ||||||
Short-term debt | -- | 53,000 | ||||||
Accounts payable | 54,117 | 88,309 | ||||||
Customer deposits | 41,895 | 34,313 | ||||||
Income taxes payable, net | -- | 10,969 | ||||||
Accrued general taxes | 34,783 | 28,400 | ||||||
Accrued interest | 19,141 | 21,137 | ||||||
Deferred purchased gas costs | 22,430 | 26,718 | ||||||
Other current liabilities | 39,214 | 41,630 | ||||||
Total current liabilities | 218,647 | 313,181 | ||||||
Deferred income taxes and other credits: | ||||||||
Deferred income taxes and investment tax credits | 250,561 | 229,358 | ||||||
Other deferred credits | 92,761 | 87,074 | ||||||
Total deferred income taxes and other credits | 343,322 | 316,432 | ||||||
Total capitalization and liabilities | $ | 2,361,485 | $ | 2,377,928 | ||||
The accompanying notes are an integral part of these statements. |
SOUTHWEST GAS CORPORATION AND SUBSIDIARIES |
THREE MONTHS ENDED MARCH 31, | TWELVE MONTHS ENDED MARCH 31, | THREE MONTHS ENDED SEPTEMBER 30, | NINE MONTHS ENDED SEPTEMBER 30, | TWELVE MONTHS ENDED SEPTEMBER 30, | ||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2003 | 2002 | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | |||||||||||||||||||||||||
Operating revenues: | ||||||||||||||||||||||||||||||||||
Gas operating revenues | $ | 359,983 | $ | 456,205 | $ | 1,019,678 | $ | 1,202,087 | $ | 167,827 | $ | 167,187 | $ | 733,192 | $ | 834,817 | $ | 1,014,275 | $ | 1,165,437 | ||||||||||||||
Construction revenues | 43,302 | 43,296 | 205,015 | 206,604 | 52,335 | 56,676 | 146,107 | 149,670 | 201,446 | 203,186 | ||||||||||||||||||||||||
Total operating revenues | 403,285 | 499,501 | 1,224,693 | 1,408,691 | 220,162 | 223,863 | 879,299 | 984,487 | 1,215,721 | 1,368,623 | ||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||||
Net cost of gas sold | 193,472 | 274,663 | 482,188 | 672,503 | 72,398 | 70,060 | 358,908 | 449,345 | 472,942 | 618,610 | ||||||||||||||||||||||||
Operations and maintenance | 66,057 | 65,302 | 264,943 | 258,118 | 66,012 | 65,924 | 196,502 | 196,259 | 264,431 | 261,558 | ||||||||||||||||||||||||
Depreciation and amortization | 33,312 | 31,434 | 132,088 | 120,984 | 34,345 | 33,015 | 101,183 | 96,052 | 135,341 | 126,709 | ||||||||||||||||||||||||
Taxes other than income taxes | 9,300 | 9,020 | 34,845 | 33,081 | 9,075 | 8,673 | 27,530 | 26,482 | 35,613 | 34,253 | ||||||||||||||||||||||||
Construction expenses | 38,830 | 38,765 | 182,133 | 183,811 | 46,617 | 49,528 | 129,358 | 132,325 | 179,101 | 180,106 | ||||||||||||||||||||||||
Total operating expenses | 340,971 | 419,184 | 1,096,197 | 1,268,497 | 228,447 | 227,200 | 813,481 | 900,463 | 1,087,428 | 1,221,236 | ||||||||||||||||||||||||
Operating income | 62,314 | 80,317 | 128,496 | 140,194 | ||||||||||||||||||||||||||||||
Operating income (loss) | (8,285 | ) | (3,337 | ) | 65,818 | 84,024 | 128,293 | 147,387 | ||||||||||||||||||||||||||
Other income and (expenses): | ||||||||||||||||||||||||||||||||||
Net interest deductions | (20,237 | ) | (19,026 | ) | (81,182 | ) | (79,518 | ) | (18,935 | ) | (19,784 | ) | (58,709 | ) | (59,710 | ) | (78,970 | ) | (79,661 | ) | ||||||||||||||
Net interest deductions on subordinated debentures | (750 | ) | -- | (750 | ) | -- | (750 | ) | -- | |||||||||||||||||||||||||
Preferred securities distributions | (1,369 | ) | (1,369 | ) | (5,475 | ) | (5,475 | ) | (1,442 | ) | (1,368 | ) | (4,180 | ) | (4,106 | ) | (5,549 | ) | (5,475 | ) | ||||||||||||||
Other income (deductions) | (17 | ) | 10,016 | (5,704 | ) | 16,757 | 978 | (2,629 | ) | 2,575 | (10,684 | ) | 17,588 | (6,545 | ) | |||||||||||||||||||
Total other income and (expenses) | (21,623 | ) | (10,379 | ) | (92,361 | ) | (68,236 | ) | (20,149 | ) | (23,781 | ) | (61,064 | ) | (74,500 | ) | (67,681 | ) | (91,681 | ) | ||||||||||||||
Income before income taxes | 40,691 | 69,938 | 36,135 | 71,958 | ||||||||||||||||||||||||||||||
Income tax expense | 15,152 | 27,042 | 9,527 | 25,715 | ||||||||||||||||||||||||||||||
Income (loss) before income taxes | (28,434 | ) | (27,118 | ) | 4,754 | 9,524 | 60,612 | 55,706 | ||||||||||||||||||||||||||
Income tax expense (benefit) | (11,027 | ) | (10,982 | ) | 726 | 3,374 | 18,769 | 18,581 | ||||||||||||||||||||||||||
Net income | $ | 25,539 | $ | 42,896 | $ | 26,608 | $ | 46,243 | ||||||||||||||||||||||||||
Net income (loss) | $ | (17,407 | ) | $ | (16,136 | ) | $ | 4,028 | $ | 6,150 | $ | 41,843 | $ | 37,125 | ||||||||||||||||||||
Basic earnings per share | $ | 0.76 | $ | 1.32 | $ | 0.80 | $ | 1.43 | ||||||||||||||||||||||||||
Basic earnings (loss) per share | $ | (0.51 | ) | $ | (0.49 | ) | $ | 0.12 | $ | 0.19 | $ | 1.25 | $ | 1.13 | ||||||||||||||||||||
Diluted earnings per share | $ | 0.76 | $ | 1.30 | $ | 0.80 | $ | 1.42 | ||||||||||||||||||||||||||
Diluted earnings (loss) per share | $ | (0.51 | ) | $ | (0.49 | ) | $ | 0.12 | $ | 0.19 | $ | 1.24 | $ | 1.12 | ||||||||||||||||||||
Dividends paid per share | $ | 0.205 | $ | 0.205 | $ | 0.82 | $ | 0.82 | $ | 0.205 | $ | 0.205 | $ | 0.615 | $ | 0.615 | $ | 0.82 | $ | 0.82 | ||||||||||||||
Average number of common shares outstanding | 33,438 | 32,620 | 33,155 | 32,319 | 33,852 | 33,065 | 33,653 | 32,862 | 33,545 | 32,752 | ||||||||||||||||||||||||
Average shares outstanding (assuming dilution) | 33,659 | 32,871 | 33,428 | 32,596 | -- | -- | 33,911 | 33,132 | 33,816 | 33,028 |
The accompanying notes are an integral part of these statements. |
SOUTHWEST GAS CORPORATION AND SUBSIDIARIES |
THREE MONTHS ENDED MARCH 31, | TWELVE MONTHS ENDED MARCH 31, | NINE MONTHS ENDED SEPTEMBER 30, | TWELVE MONTHS ENDED SEPTEMBER 30, | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2003 | 2002 | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | |||||||||||||||||||||
CASH FLOW FROM OPERATING ACTIVITIES: | ||||||||||||||||||||||||||||
Net income | $ | 25,539 | $ | 42,896 | $ | 26,608 | $ | 46,243 | $ | 4,028 | $ | 6,150 | $ | 41,843 | $ | 37,125 | ||||||||||||
Adjustments to reconcile net income to net | ||||||||||||||||||||||||||||
cash provided by operating activities: | ||||||||||||||||||||||||||||
Depreciation and amortization | 33,312 | 31,434 | 132,088 | 120,984 | 101,183 | 96,052 | 135,341 | 126,709 | ||||||||||||||||||||
Deferred income taxes | (940 | ) | (22,636 | ) | 6,012 | (38,364 | ) | 16,305 | (497 | ) | 1,118 | 1,434 | ||||||||||||||||
Changes in current assets and liabilities: | ||||||||||||||||||||||||||||
Accounts receivable, net of allowances | 10,256 | 7,619 | 27,324 | 14,444 | 57,945 | 69,412 | 13,220 | 17,963 | ||||||||||||||||||||
Accrued utility revenue | 28,373 | 27,900 | (827 | ) | (2,900 | ) | 37,073 | 34,701 | 1,072 | (3,099 | ) | |||||||||||||||||
Deferred purchased gas costs | 15,428 | 85,438 | 40,209 | 160,484 | (4,288 | ) | 112,029 | (6,098 | ) | 140,860 | ||||||||||||||||||
Accounts payable | (8,693 | ) | (12,895 | ) | (16,656 | ) | (49,020 | ) | (34,192 | ) | (57,527 | ) | 2,477 | (17,725 | ) | |||||||||||||
Accrued taxes | 28,684 | 63,466 | (785 | ) | 35,366 | (10,982 | ) | 2,995 | 20,020 | (5,235 | ) | |||||||||||||||||
Other current assets and liabilities | (444 | ) | (7,897 | ) | 12,216 | (8,802 | ) | 85 | (5,755 | ) | 10,603 | 80 | ||||||||||||||||
Other | (6,855 | ) | (7,003 | ) | (11,377 | ) | (1,728 | ) | 265 | (7,285 | ) | (3,975 | ) | (5,422 | ) | |||||||||||||
Net cash provided by operating activities | 124,660 | 208,322 | 214,812 | 276,707 | 167,422 | 250,275 | 215,621 | 292,690 | ||||||||||||||||||||
CASH FLOW FROM INVESTING ACTIVITIES: | ||||||||||||||||||||||||||||
Construction expenditures and property additions | (50,008 | ) | (55,667 | ) | (277,192 | ) | (266,116 | ) | (163,899 | ) | (197,582 | ) | (249,168 | ) | (271,463 | ) | ||||||||||||
Other | 798 | 15,173 | 9,610 | 22,370 | 3,685 | 21,284 | 6,386 | 25,879 | ||||||||||||||||||||
Net cash used in investing activities | (49,210 | ) | (40,494 | ) | (267,582 | ) | (243,746 | ) | (160,214 | ) | (176,298 | ) | (242,782 | ) | (245,584 | ) | ||||||||||||
CASH FLOW FROM FINANCING ACTIVITIES: | ||||||||||||||||||||||||||||
CASH FLOW FROM FINANCING ACTIVITIES: | ||||||||||||||||||||||||||||
Issuance of common stock, net | 4,447 | 5,353 | 17,268 | 19,448 | 13,675 | 14,774 | 17,075 | 17,916 | ||||||||||||||||||||
Issuance of subordinated debentures, net | 96,393 | -- | 96,393 | -- | ||||||||||||||||||||||||
Retirement of preferred trust securities | (60,000 | ) | -- | (60,000 | ) | -- | ||||||||||||||||||||||
Dividends paid | (6,856 | ) | (6,680 | ) | (27,185 | ) | (26,480 | ) | (20,698 | ) | (20,200 | ) | (27,507 | ) | (26,844 | ) | ||||||||||||
Issuance of long-term debt, net | 148,350 | 2,800 | 351,711 | 17,144 | 161,208 | 208,873 | 158,496 | 204,895 | ||||||||||||||||||||
Retirement of long-term debt, net | (131,912 | ) | (2,836 | ) | (339,104 | ) | (15,466 | ) | (137,576 | ) | (207,673 | ) | (139,931 | ) | (212,392 | ) | ||||||||||||
Temporary changes in long-term debt | (37,000 | ) | (70,000 | ) | 33,000 | (33,000 | ) | (19,814 | ) | -- | (19,814 | ) | -- | |||||||||||||||
Change in short-term debt | (53,000 | ) | (93,000 | ) | -- | -- | (53,000 | ) | (93,000 | ) | -- | (36,000 | ) | |||||||||||||||
Net cash provided by (used in) financing activities | (75,971 | ) | (164,363 | ) | 35,690 | (38,354 | ) | (19,812 | ) | (97,226 | ) | 24,712 | (52,425 | ) | ||||||||||||||
Change in cash and cash equivalents | (521 | ) | 3,465 | (17,080 | ) | (5,393 | ) | (12,604 | ) | (23,249 | ) | (2,449 | ) | (5,319 | ) | |||||||||||||
Cash at beginning of period | 19,392 | 32,486 | 35,951 | 41,344 | 19,392 | 32,486 | 9,237 | 14,556 | ||||||||||||||||||||
Cash at end of period | $ | 18,871 | $ | 35,951 | $ | 18,871 | $ | 35,951 | $ | 6,788 | $ | 9,237 | $ | 6,788 | $ | 9,237 | ||||||||||||
Supplemental information: | ||||||||||||||||||||||||||||
Interest paid, net of amounts capitalized | $ | 22,672 | $ | 22,631 | $ | 76,908 | $ | 78,741 | $ | 59,460 | $ | 58,702 | $ | 77,625 | $ | 75,325 | ||||||||||||
Income taxes paid (received), net | 19 | (61 | ) | 1,877 | 29,727 | (956 | ) | 1,447 | (606 | ) | 17,948 |
Period Ended March 31, | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Three Months | Twelve Months | |||||||||||||
2003 | 2002 | 2003 | 2002 | |||||||||||
Net income, as reported | $ | 25,539 | $ | 42,896 | $ | 26,608 | $ | 46,243 | ||||||
Add: | ||||||||||||||
Stock-based employee compensation | ||||||||||||||
expense included in reported net | ||||||||||||||
income, net of related tax benefits | 484 | 446 | 1,821 | 1,855 | ||||||||||
Deduct: | ||||||||||||||
Total stock-based employee | ||||||||||||||
compensation expense determined | ||||||||||||||
under fair value based method for all | ||||||||||||||
awards, net of related tax benefits | (609 | ) | (498 | ) | (2,135 | ) | (2,179 | ) | ||||||
Pro forma net income | $ | 25,414 | $ | 42,844 | $ | 26,294 | $ | 45,919 | ||||||
Earnings per share: | ||||||||||||||
Basic - as reported | $ | 0.76 | $ | 1.32 | $ | 0.80 | $ | 1.43 | ||||||
Basic - pro forma | 0.76 | 1.31 | 0.79 | 1.42 | ||||||||||
Diluted - as reported | 0.76 | 1.30 | 0.80 | 1.42 | ||||||||||
Diluted - pro forma | 0.76 | 1.30 | 0.79 | 1.41 |
Period Ended September 30, | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Three Months | Nine Months | Twelve Months | ||||||||||||||||||
2003 | 2002 | 2003 | 2002 | 2003 | 2002 | |||||||||||||||
Net income (loss), as reported | $ | (17,407 | ) | $ | (16,136 | ) | $ | 4,028 | $ | 6,150 | $ | 41,843 | $ | 37,125 | ||||||
Add: | ||||||||||||||||||||
Stock-based employee | ||||||||||||||||||||
compensation expense included | ||||||||||||||||||||
in reported net income (loss), | ||||||||||||||||||||
net of related tax benefits | 442 | 446 | 1,354 | 1,338 | 1,799 | 1,807 | ||||||||||||||
Deduct: | ||||||||||||||||||||
Total stock-based employee | ||||||||||||||||||||
compensation expense | ||||||||||||||||||||
determined under fair value | ||||||||||||||||||||
based method for all awards, | ||||||||||||||||||||
net of related tax benefits | (560 | ) | (514 | ) | (1,722 | ) | (1,512 | ) | (2,234 | ) | (2,082 | ) | ||||||||
Pro forma net income (loss) | $ | (17,525 | ) | $ | (16,204 | ) | $ | 3,660 | $ | 5,976 | $ | 41,408 | $ | 36,850 | ||||||
Earnings (loss) per share: | ||||||||||||||||||||
Basic - as reported | $ | (0.51 | ) | $ | (0.49 | ) | $ | 0.12 | $ | 0.19 | $ | 1.25 | $ | 1.13 | ||||||
Basic - pro forma | (0.52 | ) | (0.49 | ) | 0.11 | 0.18 | 1.23 | 1.13 | ||||||||||||
Diluted - as reported | (0.51 | ) | (0.49 | ) | 0.12 | 0.19 | 1.24 | 1.12 | ||||||||||||
Diluted - pro forma | (0.52 | ) | (0.49 | ) | 0.11 | 0.18 | 1.22 | 1.12 |
Natural Gas Operations | Construction Services | Total | Natural Gas Operations | Construction Services | Total | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Three months ended March 31, 2003 | ||||||||||||||||||||||
Nine months ended September 30, 2003 | ||||||||||||||||||||||
Revenues from external customers | $ | 359,983 | $ | 28,435 | $ | 388,418 | $ | 733,192 | $ | 103,466 | $ | 836,658 | ||||||||||
Intersegment revenues | -- | 14,867 | 14,867 | -- | 42,641 | 42,641 | ||||||||||||||||
Total | $ | 359,983 | $ | 43,302 | $ | 403,285 | $ | 733,192 | $ | 146,107 | $ | 879,299 | ||||||||||
Segment net income | $ | 25,336 | $ | 203 | $ | 25,539 | $ | 991 | $ | 3,037 | $ | 4,028 | ||||||||||
Three months ended March 31, 2002 | ||||||||||||||||||||||
Nine months ended September 30, 2002 | ||||||||||||||||||||||
Revenues from external customers | $ | 456,205 | $ | 28,577 | $ | 484,782 | $ | 834,817 | $ | 98,679 | $ | 933,496 | ||||||||||
Intersegment revenues | -- | 14,719 | 14,719 | -- | 50,991 | 50,991 | ||||||||||||||||
Total | $ | 456,205 | $ | 43,296 | $ | 499,501 | $ | 834,817 | $ | 149,670 | $ | 984,487 | ||||||||||
Segment net income | $ | 42,487 | $ | 409 | $ | 42,896 | $ | 2,554 | $ | 3,596 | $ | 6,150 | ||||||||||
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Period Ended September 30, | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Three Months | Nine Months | Twelve Months | ||||||||||||||||||
2003 | 2002 | 2003 | 2002 | 2003 | 2002 | |||||||||||||||
Contribution to net income (loss) | ||||||||||||||||||||
(Thousands of dollars) | ||||||||||||||||||||
Natural gas operations | $ | (18,590 | ) | $ | (18,103 | ) | $ | 991 | $ | 2,554 | $ | 37,665 | $ | 32,458 | ||||||
Construction services | 1,183 | 1,967 | 3,037 | 3,596 | 4,178 | 4,667 | ||||||||||||||
Net income (loss) | $ | (17,407 | ) | $ | (16,136 | ) | $ | 4,028 | $ | 6,150 | $ | 41,843 | $ | 37,125 | ||||||
Earnings (loss) per share | ||||||||||||||||||||
Natural gas operations | $ | (0.55 | ) | $ | (0.55 | ) | $ | 0.03 | $ | 0.08 | $ | 1.12 | $ | 0.99 | ||||||
Construction services | 0.04 | 0.06 | 0.09 | 0.11 | 0.13 | 0.14 | ||||||||||||||
Consolidated | $ | (0.51 | ) | $ | (0.49 | ) | $ | 0.12 | $ | 0.19 | $ | 1.25 | $ | 1.13 | ||||||
|
Period Ended March 31, | ||||||||||||||
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Three Months | Twelve Months | |||||||||||||
2003 | 2002 | 2003 | 2002 | |||||||||||
Contribution to net income | ||||||||||||||
(Thousands of dollars) | ||||||||||||||
Natural gas operations | $ | 25,336 | $ | 42,487 | $ | 22,077 | $ | 41,784 | ||||||
Construction services | 203 | 409 | 4,531 | 4,459 | ||||||||||
Net income | $ | 25,539 | $ | 42,896 | $ | 26,608 | $ | 46,243 | ||||||
Earnings per share | ||||||||||||||
Natural gas operations | $ | 0.75 | $ | 1.31 | $ | 0.66 | $ | 1.29 | ||||||
Construction services | 0.01 | 0.01 | 0.14 | 0.14 | ||||||||||
Consolidated | $ | 0.76 | $ | 1.32 | $ | 0.80 | $ | 1.43 | ||||||
The following table sets forth the ratios of earnings to fixed charges for the Company (because of the seasonal nature of the Company’s business, these ratios are computed on a twelve-month basis): |
For the Twelve Months Ended | |||||
---|---|---|---|---|---|
March 31, 2003 | December 31, 2002 | ||||
Ratio of earnings to fixed charges | 1.37 | 1.68 |
Three Months Ended March 31, | ||||||||
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2003 | 2002 | |||||||
(Thousands of dollars) | ||||||||
Gas operating revenues | $ | 359,983 | $ | 456,205 | ||||
Net cost of gas sold | 193,472 | 274,663 | ||||||
Operating margin | 166,511 | 181,542 | ||||||
Operations and maintenance expense | 66,057 | 65,302 | ||||||
Depreciation and amortization | 29,323 | 27,802 | ||||||
Taxes other than income taxes | 9,300 | 9,020 | ||||||
Operating income | 61,831 | 79,418 | ||||||
Other income (expense) | (268 | ) | 9,697 | |||||
Income before interest and income taxes | 61,563 | 89,115 | ||||||
Net interest deductions | 19,949 | 18,635 | ||||||
Preferred securities distributions | 1,369 | 1,369 | ||||||
Income tax expense | 14,909 | 26,624 | ||||||
Contribution to consolidated net income | $ | 25,336 | $ | 42,487 | ||||
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Twelve Months Ended March 31, | ||||||||
---|---|---|---|---|---|---|---|---|
2003 | 2002 | |||||||
(Thousands of dollars) | ||||||||
Gas operating revenues | $ | 1,019,678 | $ | 1,202,087 | ||||
Net cost of gas sold | 482,188 | 672,503 | ||||||
Operating margin | 537,490 | 529,584 | ||||||
Operations and maintenance expense | 264,943 | 258,118 | ||||||
Depreciation and amortization | 116,696 | 106,656 | ||||||
Taxes other than income taxes | 34,845 | 33,081 | ||||||
Operating income | 121,006 | 131,729 | ||||||
Other income (expense) | (6,857 | ) | 15,415 | |||||
Income before interest and income taxes | 114,149 | 147,144 | ||||||
Net interest deductions | 79,819 | 77,606 | ||||||
Preferred securities distributions | 5,475 | 5,475 | ||||||
Income tax expense | 6,778 | 22,279 | ||||||
Contribution to consolidated net income | $ | 22,077 | $ | 41,784 | ||||
For the Twelve Months Ended | |||||
---|---|---|---|---|---|
September 30, 2003 | December 31, 2002 | ||||
Ratio of earnings to fixed charges | 1.65 | 1.68 |
Three Months Ended September 30, | ||||||||
---|---|---|---|---|---|---|---|---|
2003 | 2002 | |||||||
(Thousands of dollars) | ||||||||
Gas operating revenues | $ | 167,827 | $ | 167,187 | ||||
Net cost of gas sold | 72,398 | 70,060 | ||||||
Operating margin | 95,429 | 97,127 | ||||||
Operations and maintenance expense | 66,012 | 65,924 | ||||||
Depreciation and amortization | 30,517 | 29,240 | ||||||
Taxes other than income taxes | 9,075 | 8,673 | ||||||
Operating income (loss) | (10,175 | ) | (6,710 | ) | ||||
Other (income) expense | (658 | ) | 2,985 | |||||
Net interest deductions | 18,779 | 19,379 | ||||||
Net interest deductions on subordinated debentures | 750 | -- | ||||||
Preferred securities distributions | 1,442 | 1,368 | ||||||
Income (loss) before income taxes | (30,488 | ) | (30,442 | ) | ||||
Income tax expense (benefit) | (11,898 | ) | (12,339 | ) | ||||
Contribution to consolidated net income (loss) | $ | (18,590 | ) | $ | (18,103 | ) | ||
Contribution from natural gas operations decreased $487,000 in the third quarter of 2003 compared to the same period a year ago. The decrease was principally the result of lower operating margin and increased operating costs, partially offset by improved other (income) expense. Operating margin decreased $1.7 million, or two percent, in the third quarter of 2003 compared to the third quarter of 2002. Customer growth contributed $2 million of incremental margin during the period. However, this was offset by a number of factors including variations in accrued utility revenues, gas procurement, transportation, and gas storage services. Margin from these services can vary from period to period. During the last twelve months Southwest has added nearly 64,000 customers, an increase of four percent. Operations and maintenance expense increased less than one percent between quarters. The impacts of general cost increases and costs associated with the continued expansion and upgrading of the gas system to accommodate customer growth were mitigated by cost-curbing measures implemented during the past year. Over the longer term, operations and maintenance expenses are expected to trend upward (corresponding to the customer growth rate and inflation). Depreciation expense and general taxes increased $1.7 million, or four percent, as a result of construction activities. Average gas plant in service increased $237 million, or nine percent, as compared to the third quarter of 2002. The increase reflects ongoing capital expenditures for the upgrading of existing operating facilities and the expansion of the system to accommodate continued customer growth. Other (income) expense improved $3.6 million between periods primarily due to non-recurring costs recognized in 2002. In the third quarter of 2002, costs associated with merger litigation and a regulatory disallowance in California totaled $2.1 million. In addition, returns from long-term investments improved between quarters. Net financing costs increased $224,000, or one percent, between periods. Costs associated with incremental financings were partially offset by lower interest rates on variable-rate and refinanced debt and preferred securities. Nine-Month Analysis |
Nine Months Ended September 30, | ||||||||
---|---|---|---|---|---|---|---|---|
2003 | 2002 | |||||||
(Thousands of dollars) | ||||||||
Gas operating revenues | $ | 733,192 | $ | 834,817 | ||||
Net cost of gas sold | 358,908 | 449,345 | ||||||
Operating margin | 374,284 | 385,472 | ||||||
Operations and maintenance expense | 196,502 | 196,259 | ||||||
Depreciation and amortization | 89,372 | 84,980 | ||||||
Taxes other than income taxes | 27,530 | 26,482 | ||||||
Operating income | 60,880 | 77,751 | ||||||
Other (income) expense | (1,509 | ) | 11,727 | |||||
Net interest deductions | 57,991 | 58,547 | ||||||
Net interest deductions on subordinated debentures | 750 | -- | ||||||
Preferred securities distributions | 4,180 | 4,106 | ||||||
Income (loss) before income taxes | (532 | ) | 3,371 | |||||
Income tax expense (benefit) | (1,523 | ) | 817 | |||||
Contribution to consolidated net income | $ | 991 | $ | 2,554 | ||||
Contribution from natural gas operations declined $1.6 million in the first nine months of 2003 compared to the same period a year ago. The decrease was principally the result of lower operating margin and increased operating expenses, substantially offset by the change in other (income) expense. Operating margin decreased $11.2 million, or three percent, compared to the same period a year ago. Differences in heating demand caused by weather variations between periods resulted in a $17.5 million margin decrease as warmer-than-normal temperatures were experienced during both periods. Customer growth net of conservation, energy efficiencies, and other factors, partially offset the weather variance. Operations and maintenance expense was virtually unchanged from the same period a year ago. The impacts of general cost increases and costs associated with the continued expansion and upgrading of the gas system to accommodate customer growth were offset by cost-curbing management initiatives begun in the fourth quarter of 2002. Operations and maintenance expenses overall are expected to trend higher over the longer term. Depreciation expense and general taxes increased $5.4 million, or five percent, as a result of construction activities. Average gas plant in service increased $227 million, or nine percent, as compared to the first nine months of 2002. The increase reflects ongoing capital expenditures for the upgrade of existing operating facilities and the expansion of the system to accommodate continued customer growth. Other (income) expense improved $13.2 million between periods as the prior period included several non-recurring income and expense items. These included approximately $21.3 million in costs associated with settlements of merger-related litigation, merger litigation costs, and a regulatory disallowance in California. Partially offsetting these charges was a one-time pretax gain of $8.9 million on the sale of undeveloped property recorded in the first quarter of 2002. Twelve-Month Analysis |
Twelve Months Ended September 30, | ||||||||
---|---|---|---|---|---|---|---|---|
2003 | 2002 | |||||||
(Thousands of dollars) | ||||||||
Gas operating revenues | $ | 1,014,275 | $ | 1,165,437 | ||||
Net cost of gas sold | 472,942 | 618,610 | ||||||
Operating margin | 541,333 | 546,827 | ||||||
Operations and maintenance expense | 264,431 | 261,558 | ||||||
Depreciation and amortization | 119,567 | 111,896 | ||||||
Taxes other than income taxes | 35,613 | 34,253 | ||||||
Operating income | 121,722 | 139,120 | ||||||
Other (income) expense | (16,344 | ) | 7,963 | |||||
Net interest deductions | 77,949 | 78,040 | ||||||
Net interest deductions on subordinated debentures | 750 | -- | ||||||
Preferred securities distributions | 5,549 | 5,475 | ||||||
Income before income taxes | 53,818 | 47,642 | ||||||
Income tax expense | 16,153 | 15,184 | ||||||
Contribution to consolidated net income | $ | 37,665 | $ | 32,458 | ||||
Arizona | Over-recovered | $ | 14.6 million | |||
Northern Nevada | Over-recovered | $ | 2.5 million | |||
Southern Nevada | Over-recovered | $ | 12.4 million | |||
California | Under-recovered | $ | 7.1 million | |||
In June 2003, Southwest filed its annual PGA with the Public Utilities Commission of Nevada (PUCN). Southwest is recommending a change to a monthly PGA mechanism, rather than annual, to reduce volatility in rate changes. Southwest is proposing a 12-month rolling average of actual gas costs to set rates each month. If the monthly PGA is approved by the PUCN, it is anticipated that rates would increase 12.2 percent for customers in southern Nevada and decrease 13.1 percent in northern Nevada. If the monthly proposal is rejected and the current annual PGA method is retained, it is anticipated that rates would increase 12.2 percent in southern Nevada and decrease 10.2 percent in northern Nevada. A decision is expected in the fourth quarter of 2003. Other FilingsSince November 1999, the Federal Energy Regulatory Commission (FERC) has been examining capacity allocation issues on the El Paso Natural Gas Company (El Paso) system in several proceedings. This examination resulted in a series of
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ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
The Company has established disclosure controls and procedures that are designed to ensure
ITEM 4. | CONTROLS AND PROCEDURES |
ITEM 1. | LEGAL PROCEEDINGS |
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