Warm weather hurts SW Gas results

Kevin Rademacher

Wednesday, Feb. 18, 2004 | 11:20 a.m.

A rare December snow storm in Las Vegas was not enough to perk up revenue for Southwest Gas Corp. of Las Vegas.

The natural gas provider on Tuesday reported fourth-quarter net income of $34.5 million, or $1 per diluted share. That's down from $37.8 million, or $1.13 per share, reported for the same 2002 quarter.

The company's stock was off slightly this morning, trading at $23.75, down 5 cents.

As has been the case in recent earnings shortfalls, Michael Maffie, Southwest Gas chief executive, blamed the weak demand for natural gas on warmer-than-normal weather that kept furnaces silent.

The results, he said in a statement, "reflect the impacts of extreme warm temperatures in our service territory that began in January and continued throughout much of the heating seasons of 2003. Nevada experienced its second warmest year and Arizona its fifth warmest year in over 100 years."

The company estimated that the effect of weather on earnings was about 59 cents per share on full-year 2003 results of $1.13, down from $1.32 in 2002.

"It seems like earnings, more or less, are in line with expectations," said Jake Mercer, a utilities analyst for Piper Jaffray. "Obviously 2003 is a year they would like to forget, but obviously the majority is because of the extreme weather."

Fourth-quarter operating revenue of $352 million was up from $336 million in the year-ago period. Operating margin for the company -- defined as operating revenue minus the cost of gas sold -- increased $10.5 million over the same 2002 period.

The company said customer growth contributed $7 million in the quarter. However, operating expenses increased by $4 million, or 4 percent. That increase was driven by higher labor costs necessary to meet that growth.

The company also reported a $1.1 million, or 5 percent, decline in financing costs due to lower interest rates on variable-rate and refinanced debt.

Those moves, Mercer said, should position the company for strong future performance.

"They had the largest internal growth rate of any natural gas distribution company in the United States," he said. "They will reap the dividends when they can get into more normal weather."

Southwest Gas provides service to 1.5 million customers in Arizona, Nevada and California, including about 450,000 customers in Southern Nevada.