Southwest Gas Holdings, Inc. Announces 2021 Earnings
Southwest Gas Holdings (SWX) announced its 2021 financial results, reporting consolidated earnings of $3.39 per diluted share and adjusted earnings of $4.17 per diluted share, compared to $4.14 in 2020. The company achieved a consolidated net income of $200.8 million, with the natural gas distribution segment contributing significantly to earnings. The utility infrastructure segment reported net income of $40.4 million. The company plans to separate its utility infrastructure segment, Centuri, to maximize stockholder value. For 2022, net income guidance has been set between $200 million and $210 million.
- Consolidated earnings per diluted share at $3.39 for 2021.
- Natural gas distribution segment net income increased to $187.1 million, up from $159.1 million in 2020.
- Added over 37,000 new customers in 2021.
- Acquisition of MountainWest provides high-return assets.
- Increased operating margin by $83 million year-over-year.
- Utility infrastructure services segment net income decreased to $40.4 million from $74.9 million in 2020.
- Operations and maintenance expenses increased by 8%, amounting to $32 million.
- No EPS guidance provided for 2022 due to separation uncertainty.
LAS VEGAS, March 1, 2022 /PRNewswire/ -- Southwest Gas Holdings, Inc. (NYSE: SWX) reported consolidated earnings of
- The natural gas distribution segment had net income of
$187.1 million and adjusted net income of$190.9 million in 2021, compared to net income and adjusted net income of$159.1 million in 2020. - The utility infrastructure services segment had net income of
$40.4 million and adjusted net income of$61.9 million in 2021, compared to net income and adjusted net income of$74.9 million in 2020.
"Transformational investments in 2021 positioned us to deliver sustained stockholder value and growth enterprise-wide," said John P. Hester, President and Chief Executive Officer. "Our natural gas distribution segment, Southwest Gas, serving one of the fastest growing economic regions in the United States, added over 37,000 customers in 2021. Our strong, collaborative relationships with our state regulatory commissions contributed to near record growth in revenues and rate base in 2021, and we continue to grow Southwest Gas' customers, rate base, EBITDA and net income. Our recent acquisition of MountainWest provides a complementary and compelling suite of high-return assets, with unique strength and stability, that are both commercially and geographically adjacent to our regulated utility operations. We are confident that we can continue to deliver significant value for stockholders and reliable, affordable and clean energy across our service territories."
"We have grown Centuri into a leading, high-growth utility infrastructure services company that is uniquely positioned to benefit from the surge in infrastructure spending throughout the country," Mr. Hester continued. "Our recent acquisition of Riggs Distler transforms Centuri by adding capabilities to support the 5G datacom buildout, offshore wind and other renewable energy transition programs. In October 2021, Riggs Distler was selected to work on a large-scale offshore wind energy project, the largest in New York to date, growing its portfolio of work in emerging clean energy technologies."
"Across all of our businesses, we are actively working to support the energy transition. In addition to the many opportunities at Centuri, Southwest Gas is advancing its sustainability initiatives and ongoing low-carbon projects, while MountainWest has numerous attractive opportunities with renewable natural gas, responsibly sourced natural gas, hydrogen and CO2 transportation," said Mr. Hester.
During the fourth quarter of 2021, consolidated net income was
Natural Gas Distribution Segment Results
Full Year 2021
Southwest Gas increased its operating margin
Operations and maintenance expense increased
Depreciation and amortization expense increased
Other income increased
Net interest deductions decreased
The
Fourth Quarter
Natural gas distribution segment net income increased to
Southwest Gas increased its operating margin
Operations and maintenance expense increased
Other income decreased
Utility Infrastructure Services Segment Results
Full Year 2021
Revenues increased
Utility infrastructure services expenses increased
Depreciation and amortization expense increased
Other income increased
The increase in net interest deductions of
Income tax expense decreased
Fourth Quarter
Utility infrastructure services segment net income was
Utility infrastructure revenues increased
Utility infrastructure services expenses increased
Depreciation and amortization increased
Conference Call and Webcast
Southwest Gas will host a conference call on Wednesday, March 2, 2022, at 1 p.m. ET to discuss its fourth quarter and full year 2021 results. The associated press releases and presentation slides are available at https://investors.swgasholdings.com/investor-overview.
The call will be webcast live on the Company's website at www.swgasholdings.com. The telephone dial-in numbers in the U.S. and Canada are toll free: (877) 419-3678 or international: (614) 610-1910. The conference ID is 7668616. The webcast will be archived on the Southwest Gas website.
Outlook for 2022
On March 1, 2022, the Company announced that its Board of Directors has unanimously decided to separate Centuri from the Company. The separation is expected to occur within the next 9 to 12 months. The separation will be effected with the goal of maximizing value for Southwest Gas stockholders. Details of the separation, including structure, will be publicly disclosed following the Company's finalization of its separation plans.
In connection with the decision to separate Centuri, and the uncertainty of associated costs and timing, management is not providing EPS guidance at this time and is replacing its prior guidance with the following expectations for 2022:
Natural Gas Distribution Segment
- Net income of
$200 million to$210 million , which includes COLI earnings of$3 million to$5 million . - Capital expenditures of
$650 million to$700 million , in support of customer growth, system improvements, and pipe replacement programs. - Five-year utility rate base compound annual growth rate of
7% (2022 – 2026).
MountainWest
- 2022 revenue of
$240 million to$245 million . - Run rate EBITDA margin of
68% to72% (excluding non-recurring integration costs). - Accretive to earnings in 2022 on a run rate basis.
Utility Infrastructure Services Segment
- Revenues for 2022 are expected to be
$2.65 billion to$2.80 billion . - Normalized EBITDA margin of
11% to12% (excluding non-recurring separation costs).
Southwest Gas Holdings currently has three business segments:
Southwest Gas Corporation provides safe and reliable natural gas service to over 2 million customers in Arizona, Nevada, and California.
MountainWest operates over 2,000 miles of highly contracted, FERC-regulated interstate natural gas pipeline providing transportation and underground storage services in the Rocky Mountain region.
Centuri Group, Inc. is a strategic infrastructure services company that partners with regulated utilities to build and maintain the energy network that powers millions of homes and businesses across the United States and Canada.
Forward-Looking Statements: This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements include, without limitation, statements regarding Southwest Gas Holdings, Inc. (the "Company") and the Company's expectations or intentions regarding the future. These forward-looking statements can often be identified by the use of words such as "will", "predict", "continue", "forecast", "expect", "believe", "anticipate", "outlook", "could", "target", "project", "intend", "plan", "seek", "estimate", "should", "may" and "assume", as well as variations of such words and similar expressions referring to the future, and include (without limitation) statements regarding expectations of continuing growth in 2022. In addition, the statements under the heading "Outlook for 2022" that are not historic, constitute forward-looking statements. A number of important factors affecting the business and financial results of the Company could cause actual results to differ materially from those stated in the forward-looking statements. These factors include, but are not limited to, the timing and amount of rate relief, changes in rate design, customer growth rates, the effects of regulation/deregulation, tax reform and related regulatory decisions, the impacts of construction activity at Centuri, whether we will separate Centuri within the anticipated timeframe and the impact to our results of operations and financial position from the separation, the potential for, and the impact of, a credit rating downgrade, the costs to integrate MountainWest, future earnings trends, inflation, sufficiency of labor markets and similar resources, seasonal patterns, the cost and management attention of ongoing litigation that the Company is currently engaged in, the effects of the pending tender offer and proxy contest brought by Carl Icahn and his affiliates, and the impacts of stock market volatility. In addition, the Company can provide no assurance that its discussions about future operating margin, operating income, COLI earnings, interest expense, and capital expenditures of the natural gas distribution segment will occur. Likewise, the Company can provide no assurance that discussions regarding utility infrastructure services segment revenues, EBITDA as a percentage of revenue, and interest expense will transpire, nor assurance regarding acquisitions or their impacts, including management's plans or expectations related thereto, including with regard to Riggs Distler or MountainWest. Factors that could cause actual results to differ also include (without limitation) those discussed under the heading "Risk Factors" in Southwest Gas Holdings, Inc.'s most recent Annual Report on Form 10-K and in the Company's and Southwest Gas Corporation's current and periodic reports, including our Quarterly Reports on Form 10-Q, filed from time to time with the SEC. The statements in this press release are made as of the date of this press release, even if subsequently made available by the Company on its Web site or otherwise. The Company does not assume any obligation to update the forward-looking statements, whether written or oral, that may be made from time to time, whether as a result of new information, future developments, or otherwise.
Non-GAAP Measures. This earnings release contains financial measures that have not been calculated in accordance with accounting principles generally accepted in the U.S. ("GAAP"). These non-GAAP measures include (i) adjusted consolidated earnings per diluted share, (ii) adjusted consolidated net income, (iii) natural gas distribution segment adjusted net income, (iv) utility infrastructure services segment adjusted net income, and (v) corporate and administrative adjusted net loss. Management uses these non-GAAP measures internally to evaluate performance and in making financial and operational decisions. Management believes that its presentation of these measures provides investors greater transparency with respect to its results of operations and that these measures are useful for a period-to-period comparison of results. Management also believes that providing these non-GAAP financial measures helps investors evaluate the Company's operating performance, profitability, and business trends in a way that is consistent with how management evaluates such performance. Adjusted consolidated net income for the three months and year ended December 31, 2021 includes adjustments to add back expenses related to the MountainWest acquisition and expenses related to the ongoing proxy contest and related stockholder litigation. Management believes that it is appropriate to adjust for expenses related to the MountainWest acquisition because they are one-time expenses that will not recur in future periods. Management believes it is appropriate to adjust for expenses related to the proxy contest and related stockholder litigation because of these matters are unique and outside of the ordinary course of business for the Company. In addition, utility infrastructure adjusted net income and adjusted consolidated net income include adjustments associated with acquisition-related costs and partial-year net loss related to the Riggs Distler acquisition.
Management also uses the non-GAAP measure of operating margin related to its natural gas distribution operations. Southwest recognizes operating revenues from the distribution and transportation of natural gas (and related services) to customers. Gas cost is a tracked cost, which is passed through to customers without markup under purchased gas adjustment ("PGA") mechanisms, impacting revenues and net cost of gas sold on a dollar-for-dollar basis, thereby having no impact on Southwest's profitability. Therefore, management routinely uses operating margin, defined by management as gas operating revenues less the net cost of gas sold, in its analysis of Southwest's financial performance. Operating margin also forms a basis for Southwest's various regulatory decoupling mechanisms. Management believes supplying information regarding operating margin provides investors and other interested parties with useful and relevant information to analyze Southwest's financial performance in a rate-regulated environment. (The included Southwest Gas Holdings, Inc. Consolidated Earnings Digest provides reconciliations for these non-GAAP measures.)
We do not provide a reconciliation of forward-looking Non-GAAP Measures to the corresponding forward-looking GAAP measure due to our inability to project special charges and certain expenses.
SOUTHWEST GAS HOLDINGS, INC. CONSOLIDATED EARNINGS DIGEST | ||||
(In thousands, except per share amounts) | ||||
Year Ended December 31, | ||||
2021 | 2020 | |||
Consolidated Operating Revenues | $ 3,680,451 | $ 3,298,873 | ||
Net Income applicable to Southwest Gas Holdings | $ 200,779 | $ 232,324 | ||
Weighted Average Common Shares | 59,145 | 55,998 | ||
Basic Earnings Per Share | $ 3.39 | $ 4.15 | ||
Diluted Earnings Per Share | $ 3.39 | 4.14 | ||
Reconciliation of Gross margin to Operating Margin (Non-GAAP measure) | ||||
Utility Gross Margin | $ 570,325 | $ 528,730 | ||
Plus: | ||||
Operations and maintenance (excluding Admin & General) expense | 267,160 | 243,723 | ||
Depreciation and amortization expense | 253,398 | 235,295 | ||
Operating Margin | $ 1,090,883 | $ 1,007,748 | ||
Three Months Ended December 31, | ||||
2021 | 2020 | |||
Consolidated Operating Revenues | $ 1,084,427 | $ 914,080 | ||
Net Income applicable to Southwest Gas Holdings | $ 69,943 | $ 103,544 | ||
Weighted Average Common Shares | 60,647 | 56,934 | ||
Basic Earnings Per Share | $ 1.15 | $ 1.82 | ||
Diluted Earnings Per Share | $ 1.15 | $ 1.82 | ||
Reconciliation of Gross margin to Operating Margin (Non-GAAP measure) | ||||
Utility Gross Margin | $ 178,135 | $ 173,876 | ||
Plus: | ||||
Operations and maintenance (excluding Admin & General) expense | 72,689 | 60,962 | ||
Depreciation and amortization expense | 65,710 | 61,430 | ||
Operating Margin | $ 316,534 | $ 296,268 |
Reconciliation of non-GAAP financial measures of Adjusted net income (loss) and Adjusted diluted earnings per share and their comparable GAAP measures of Net income (loss) and Diluted earnings (loss) per share. Note that the comparable GAAP measures are also included in Note 13 - Segment Information in the Company's December 31, 2021 Form 10-K. Prior periods are not presented below as comparable non-GAAP adjustments were not applicable in comparable periods of the prior year.
Amounts in thousands, except per share amounts | ||
Three Months |
Year Ended | |
Ended | ||
December 31, 2021 | ||
Reconciliation of Net income to non-GAAP measure of Adjusted net income | ||
Net income applicable to Natural Gas Distribution (GAAP) | $ 84,551 | $ 187,135 |
Plus: | ||
Legal reserve, net of tax | - | 3,800 |
Adjusted net income applicable to Natural Gas Distribution | $ 84,551 | $ 190,935 |
Net income applicable to Infrastructure Services (GAAP) | $ 7,623 | $ 40,420 |
Plus: | ||
Riggs Distler transaction costs, net of tax | - | 11,663 |
Riggs Distler interim operations loss, interest and other, net of tax | 7,300 | 9,837 |
Adjusted net income applicable to Infrastructure Services | $ 14,923 | $ 61,920 |
Net loss - Corporate and administrative (GAAP) | $ (22,231) | $ (26,776) |
Plus: | ||
Questar Pipelines transaction costs, net of tax | 17,329 | 17,329 |
Proxy contest and shareholder litigation, net of tax | 3,421 | 3,421 |
Adjusted net loss applicable to Corporate and administrative | $ (1,481) | $ (6,026) |
Net income applicable to Southwest Gas Holdings (GAAP) | $ 69,943 | $ 200,779 |
Plus: | ||
Legal reserve, net of tax | - | 3,800 |
Riggs Distler transaction costs, net of tax | - | 11,663 |
Riggs Distler interim operations loss, interest and other, net of tax | 7,300 | 9,837 |
Questar Pipelines transaction costs, net of tax | 17,329 | 17,329 |
Proxy contest and shareholder litigation, net of tax | 3,421 | 3,421 |
Ongoing net income applicable to Southwest Gas Holdings | $ 97,993 | $ 246,829 |
Weighted average shares - diluted | 60,795 | 59,259 |
Earnings per share | ||
Diluted earnings per share | $ 1.15 | $ 3.39 |
Adjusted consolidated earnings per diluted share | $ 1.61 | $ 4.17 |
For investor information, contact: | For media information, contact: |
Boyd Nelson | Sean Corbett |
(702) 876-7237 | (702) 876-7219 |
SOUTHWEST GAS HOLDINGS, INC. | |||||||
SUMMARY UNAUDITED OPERATING RESULTS | |||||||
(In thousands, except per share amounts) | |||||||
Three Months Ended | Year Ended | ||||||
2021 | 2020 | 2021 | 2020 | ||||
Results of Consolidated Operations | |||||||
Contribution to net income - gas distribution | $ 84,551 | $ 79,550 | $ 187,135 | $ 159,118 | |||
Contribution to net income - utility infrastructure services | 7,623 | 23,926 | 40,420 | 74,862 | |||
Corporate and administrative | (22,231) | 68 | (26,776) | (1,656) | |||
Net income | $ 69,943 | $ 103,544 | $ 200,779 | $ 232,324 | |||
Basic earnings per share | $ 1.15 | $ 1.82 | $ 3.39 | $ 4.15 | |||
Diluted earnings per share | $ 1.15 | $ 1.82 | $ 3.39 | $ 4.14 | |||
Weighted average common shares | 60,647 | 56,934 | 59,145 | 55,998 | |||
Weighted average diluted shares | 60,795 | 57,034 | 59,259 | 56,076 | |||
Results of Natural Gas Distribution | |||||||
Gas operating revenues | $ 451,214 | $ 374,490 | $ 1,521,790 | $ 1,350,585 | |||
Net cost of gas sold | 134,680 | 78,222 | 430,907 | 342,837 | |||
Operating margin | 316,534 | 296,268 | 1,090,883 | 1,007,748 | |||
Operations and maintenance expense | 109,570 | 102,815 | 438,550 | 406,382 | |||
Depreciation and amortization | 65,710 | 61,430 | 253,398 | 235,295 | |||
Taxes other than income taxes | 20,209 | 15,953 | 80,343 | 63,460 | |||
Operating income | 121,045 | 116,070 | 318,592 | 302,611 | |||
Other income (deductions) | 343 | 4,357 | (4,559) | (6,590) | |||
Net interest deductions | 26,297 | 25,996 | 97,560 | 101,148 | |||
Income before income taxes | 95,091 | 94,431 | 216,473 | 194,873 | |||
Income tax expense | 10,540 | 14,881 | 29,338 | 35,755 | |||
Contribution to net income - gas distribution | $ 84,551 | $ 79,550 | $ 187,135 | $ 159,118 |
FINANCIAL STATISTICS | ||
Market value to book value per share at quarter end | ||
Twelve months to date return on equity -- total company | ||
-- gas distribution | ||
Common stock dividend yield at quarter end | ||
Customer to employee ratio at quarter end (gas distribution segment) | 945 to 1 |
NATURAL GAS DISTRIBUTION SEGMENT | ||||||
Authorized Rate Base | Authorized Rate | Authorized Return | ||||
Rate Jurisdiction | ||||||
Arizona | $ 1,930,612 | |||||
Southern Nevada | 1,325,236 | 6.52 | 9.25 | |||
Northern Nevada | 154,966 | 6.75 | 9.25 | |||
Southern California | 285,691 | 7.11 | 10.00 | |||
Northern California | 92,983 | 7.44 | 10.00 | |||
South Lake Tahoe | 56,818 | 7.44 | 10.00 | |||
Great Basin Gas Transmission Company (1) | 135,460 | 8.30 | 11.80 | |||
(1) Estimated amounts based on 2019/2020 rate case settlement. | ||||||
SYSTEM THROUGHPUT BY CUSTOMER CLASS | ||||||
Year Ended December 31, | ||||||
(In dekatherms) | 2021 | 2020 | 2019 | |||
Residential | 76,810,460 | 80,067,973 | 81,838,973 | |||
Small commercial | 31,050,963 | 29,316,352 | 33,322,111 | |||
Large commercial | 9,490,130 | 9,124,202 | 9,932,641 | |||
Industrial / Other | 5,104,137 | 5,315,357 | 4,255,086 | |||
Transportation | 94,955,200 | 98,327,608 | 100,798,916 | |||
Total system throughput | 217,410,890 | 222,151,492 | 230,147,727 | |||
HEATING DEGREE DAY COMPARISON | ||||||
Actual | 1,627 | 1,764 | 1,908 | |||
Ten-year average | 1,637 | 1,672 | 1,693 |
Heating degree days for prior periods have been recalculated using the current period customer mix. |
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SOURCE Southwest Gas Holdings, Inc.
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