UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER
For the fiscal year ended December 31, 1998
COMMISSION FILE NUMBER2003
Commission File Number 1-7850
SOUTHWEST GAS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 88-0085720
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
5241 SPRING MOUNTAIN ROAD
POST OFFICE BOX 98510
LAS VEGAS, NEVADA 89193-8510
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(Exact name of registrant as specified in its charter)
| California | 88-0085720 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
5241 Spring Mountain Road Post Office Box 98510 Las Vegas, Nevada | 89193-8510 | |
| (Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: (702) 876-7237
SECURITIES REGISTERED PURSUANT TO SECTION
Securities registered pursuant to Section 12(b) OF THE ACT:
of the Act:
Title of each class | Name of each exchange on which registered | |
Common Stock, $1 par value | New York Stock Exchange, Inc. | |
| Pacific | ||
7.70% Preferred Trust | New York Stock Exchange, Inc. |
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 Y NO
--- ---
Yesþ No¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant'sregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY
NONAFFILIATES OF THE REGISTRANT:
$824,362,704 at March 15, 1999
THE NUMBER OF SHARES OUTSTANDING OF COMMON STOCK:
þ
Indicate by check mark whether the registrant is an accelerated filer.Yesþ No¨
Aggregate market value of the voting and non-voting common stock held by nonaffiliates of the registrant:
$715,068,782 as of June 30, 2003
The number of shares outstanding of common stock:
Common Stock, $1 Par Value, 30,531,95234,517,481 shares as of March 15, 1999
1, 2004
DOCUMENTS INCORPORATED BY REFERENCE
Description | Part Into Which Incorporated | |
Annual Report to Shareholders for the Year Ended December 31, | Parts I, II, and IV | |
2004 Proxy Statement | Part III |
PART I
Item 1. BUSINESS
The registrant,
Southwest Gas Corporation (the Company), is“Company”) was incorporated, effective March 1931, under the laws of the Statestate of California effective March 1931. The executive
offices of the Company are located at 5241 Spring Mountain Road, P.O. Box 98510,
Las Vegas, Nevada, 89193-8510, telephone number (702) 876-7237.California. The Company is principallycomprised of two business segments: natural gas operations (“Southwest” or the “natural gas operations” segment) and construction services. Southwest is engaged in the business of purchasing, transporting, and distributing natural gas to residential, commercial, and
industrial customers in geographically diverse portions of Arizona, Nevada, and California (Southwest orCalifornia. Southwest is the largest distributor in Arizona, selling and transporting natural gas operations segment).in most of central and southern Arizona, including the Phoenix and Tucson metropolitan areas. Southwest is also the largest distributor and transporter of natural gas in Nevada, serving the Las Vegas metropolitan area and northern Nevada. In April 1996,addition, Southwest distributes and transports natural gas in portions of California, including the Company acquired all ofLake Tahoe area and the outstanding stock of
high desert and mountain areas in San Bernardino County.
Northern Pipeline Construction Co. (Northern(“NPL” or the construction services“construction services” segment) pursuant to, a definitive agreement dated November 1995. The Company
issued approximately 1,439,000 shares of common stock valued at $24 million in
connection with the acquisition. The acquisition was accounted for aswholly owned subsidiary, is a purchase. The construction services segmentfull-service underground piping contractor that provides utility companies with trenching and installation, replacement, and maintenance services for energy distribution systems.
In July 1996, the Company completed the sale of the assets and liabilities
of PriMerit Bank, Federal Savings Bank (PriMerit), a wholly owned subsidiary, to
Norwest Corporation (Norwest) for $191 million pursuant to a definitive
agreement dated January 1996. For consolidated financial reporting purposes, the
financial services activities are disclosed as discontinued operations.
Financial information with respect to industryconcerning the Company’s business segments is included in Note 1411 of the Notes to Consolidated Financial Statements which is included in the 19982003 Annual Report to Shareholders and is incorporated herein by reference.
In December 1998, the Boards of Directors of the
The Company and ONEOK, Inc.
(ONEOK), headquartered in Tulsa, Oklahoma, announcedmaintains a definitive agreementwebsite (www.swgas.com) for the benefit of shareholders, investors, customers, and other interested parties. The Company makes its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to be merged into ONEOK. The agreement calls for ONEOKthose reports available, free of charge, through its website as soon as reasonably practicable after such material is electronically filed with, or furnished to, pay cash
of $28.50 for each share of Company common stock outstanding. The transaction is
subject to customary conditions, including approvals from shareholders of the CompanySecurities and state regulators in Arizona, California, and Nevada. ONEOK expects
to account for the merger using the purchase method of accounting. If the merger
is consummated, the Company would operate as a division of ONEOK.
In February 1999, the Company announced that it had received an unsolicited
proposal from Southern Union Company (Southern Union), headquartered in Austin,
Texas, offering to acquire the Company for $32.00 per share in cash. The
proposal is preliminary in nature and subject to a number of contingencies and
uncertainties. Under the terms of the agreement with ONEOK, as a result of
certain preliminary determinations made by the Board of Directors of the
Company, the Board of Directors has authorized management to commence
substantive discussions with Southern Union regarding its proposal. No
assurances can be given that any agreement will be reached with Southern Union.
The merger agreement with ONEOK remains in full force and effect.
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Exchange Commission (“SEC”).
NATURAL GAS OPERATIONS
GENERAL DESCRIPTION
Southwest is subject to regulation by the Arizona Corporation Commission (ACC)(“ACC”), the Public Utilities Commission of Nevada (PUCN)(“PUCN”), and the California Public Utilities Commission (CPUC)(“CPUC”). These commissions regulate public utility rates, practices, facilities, and service territories in their respective states. The CPUC also regulates the issuance of all securities by the Company, with the exception of short-term borrowings. Certain accounting practices, transmission facilities, and rates are subject to regulation by the Federal Energy Regulatory Commission (FERC)(“FERC”). NPL is not regulated by the state utilities commissions in any of its operating areas.
As of December 31, 2003, Southwest purchases, transports,purchased, transported, and distributesdistributed natural gas to 1,209,0001,531,000 residential, commercial, and industrial customers in geographically diverse portions of Arizona, Nevada, and California. There were 58,00067,000 customers added to the system during 1998.
2003 (and an additional 9,000 in central Arizona associated with the acquisition of Black Mountain Gas Company (“BMG”) in October 2003).
The table below lists the percentage of Southwest operating margin (operating revenues less net cost of gas) by major customer class for the years indicated:
| Distribution | Transportation | |||||
For the Year Ended | Residential and Small Commercial | Other Sales Customers | ||||
December 31, 2003 | 84% | 6% | 10% | |||
December 31, 2002 | 83% | 7% | 10% | |||
December 31, 2001 | 82% | 8% | 10% | |||
Southwest is not dependent on any one or a few customers to the extent that the loss of any one or several would have a significant adverse impact on earnings.
Transportation of customer-secured gas to end-users on the Southwest system
accounted for 4854 percent of total system throughput in 1998.2003. Although the volumes were significant, these customers provide a much smaller proportionate share of operating margin. In 1998, customersCustomers who utilized this service transported 100134 million dekatherms.
dekatherms in 2003, 133 million dekatherms in 2002, and 127 million dekatherms in 2001.
The demand for natural gas is seasonal. Variability in weather from normal temperatures can materially impact results of operations. It is the opinion of management that comparisons of earnings for interim periods do not reliably reflect overall trends and changes in Southwest operations. Also, earnings for interim periods can be significantly affected by the timing of general rate relief.
RATES AND REGULATION
Rates that Southwest is authorized to charge its distribution system customers are determined by the ACC, CPUC,PUCN, and PUCNCPUC in general rate cases and are derived using rate base, cost of service, and cost of capital experienced in a historical test year, as adjusted in Arizona and Nevada, and projected for a future test year in California. The FERC regulates the northern Nevada transmission and liquefied natural gas (LNG)(“LNG”) storage facilities of Paiute Pipeline Company (Paiute)(“Paiute”), a wholly owned subsidiary, and the rates it charges for transportation of gas directly to certain end-users and to various local distribution companies (LDCs)(“LDCs”). The LDCs transporting on the Paiute system are: Sierra Pacific Power Company (serving Reno and Sparks, Nevada), Avista Utilities (serving South Lake Tahoe, California), and Southwest Gas Corporation (serving Truckee and North Lake Tahoe, California and various locations throughout northern Nevada).
Rates charged to customers vary according to customer class and rate jurisdiction and are set at levels allowingthat are intended to allow for the recovery of all prudently incurred costs, including a return on rate base sufficient to pay interest on debt, preferred securities distributions, and a reasonable return on common equity. Rate base consists generally of the original cost of utility plant in service, plus certain other assets such as working capital and inventories, less accumulated depreciation on utility 2
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plant in service, net deferred income tax liabilities, and certain other deductions. Rate schedules in all of the Southwest service areas contain purchased gas adjustment (PGA)(“PGA”) clauses, which allow Southwest to file for rate adjustments as the cost of purchased gas changes. Generally, SouthwestIn Nevada, tariffs provide for annual adjustment dates for changes in purchased gas costs. However,
Southwest may requestmake additional requests to adjust its rates, more often than once each year, if market conditions warrant. TheseIn Arizona, Southwest adjusts rates monthly for changes in purchased gas costs, within pre-established limits. In California, a monthly gas cost adjustment based on forecasted monthly prices is used to adjust rates. PGA rate changes affect cash flows but have no direct impact on profit margin. Filings to change rates in accordance with PGA clauses are subject to audit by the appropriate state regulatory commission staffs.staff. Information with respect to recent general rate cases and PGA filings is included in the Rates and Regulatory Proceedings section of Management'sManagement’s Discussion and Analysis (MD&A), which is included(“MD&A”) in the 19982003 Annual Report to Shareholders.
The table below lists the docketed general rate filings last initiated and/or completedand the status of such filing within each ratemaking area:
Ratemaking Area | Type of Filing | Month Filed | Month Final Rates Effective | |||
Arizona | General rate case | May 2000 | November | |||
California: | ||||||
Northern and | General rate case | February 2002 | Pending | |||
Nevada: | ||||||
Northern and Southern | General rate case | March 2004 | Pending | |||
FERC: | ||||||
Paiute | General rate case | July 1996 | January 1997 |
Demand for restructuring both the natural gas and electric industries in the State of
Nevada to allow competition. The legislature left most of the decision making on
restructuring to the PUCN. In addition to several organizational changes, AB 366
required the PUCN to create an alternative plan of regulation by July 1, 1998.
The PUCN issued two decisions during 1998. The first identified the distinct
componentsNatural Gas
Deliveries of natural gas service.by Southwest are made under a priority system established by state regulatory commissions. The second establishedpriority system is intended to ensure that the gas requirements of higher-priority customers, primarily residential customers and other customers who use 500 therms of gas per day or less, are fully satisfied on a proceduredaily basis before lower-priority customers, primarily electric utility and large industrial customers able to use alternative fuels, are provided any quantity of gas or capacity.
Demand for natural gas is greatly affected by which
partiestemperature. On cold days, use of gas by residential and commercial customers may requestbe as much as six times greater than on warm days because of increased use of gas for space heating. To fully satisfy this increased high-priority demand, gas is withdrawn from storage in certain service areas, or peaking supplies are purchased from suppliers. If necessary, service to interruptible lower-priority customers may be curtailed to provide the needed delivery system capacity. No curtailment occurred during the latest peak heating season. Southwest maintains no significant backlog on its orders for gas service.
Southwest is responsible for acquiring (purchasing) and arranging delivery of (transporting) natural gas to its system for all sales customers.
The primary objective of Southwest with respect to acquiring gas supply is to ensure that adequate, as well as economical, supplies of natural gas are available from reliable sources. Gas is acquired from a wide variety of sources and a mix of purchase provisions, including spot market purchases and firm supplies with a variety of terms. During 2003, Southwest acquired gas supplies from 48 suppliers. This practice mitigates the risk of nonperformance by any one supplier.
Balancing reliable supply assurances with the associated costs results in a continually changing mix of purchase provisions within the supply portfolios. To address the unique requirements of its various market areas, Southwest assembles and administers a separate natural gas supply portfolio for each of its jurisdictional areas. Firm and spot market natural gas purchases are made in a competitive bid environment. Southwest has experienced price volatility over the past five years, as the weighted average delivered cost of natural gas has ranged from a low of 28 cents per therm in 1999 to a high of 55 cents per therm in 2001. During 2003, Southwest paid an average of 46 cents per therm. To mitigate customer exposure to market price volatility, Southwest continues to purchase a significant percentage of its forecasted annual normal weather requirements under firm, fixed-price arrangements that are secured periodically throughout the year.
The firm, fixed-price arrangements are structured such that a servicestated volume of gas is required to be classifiedscheduled by Southwest and delivered by the supplier. If the gas is not needed by Southwest or cannot be procured by the supplier, the contract provides for fixed or market-based penalties to be paid by the non-performing party. In the event that demand on Southwest’s system is lower than expected, Southwest may have the opportunity to forego the purchase at a negotiated price in excess of the contracted price during periods of extreme price volatility. Any savings would reduce the overall cost of gas for the purchase period.
In managing its gas supply portfolios, Southwest uses the fixed-price arrangements noted above, but does not currently utilize other stand-alone derivative financial instruments. In the future stand-alone derivatives may be used to hedge against possible price increases. However, any such change would be undertaken with the knowledge of Southwest’s various regulatory commissions.
Storage capability can influence the average annual price of gas, as "potentially competitive."
Oncestorage allows a servicecompany to purchase natural gas in larger quantities during the off-peak season and store it for use in high demand periods when prices may be greater. Southwest currently has been considered potentially competitiveno storage availability in its Arizona or southern Nevada rate jurisdictions. Limited storage capabilities exist in southern and northern California and northern Nevada. A contract with Southern California Gas Company is intended for delivery only within Southwest’s southern California rate jurisdiction. In addition, a contract with Paiute for its LNG facility in northern Nevada and northern California allows for peaking capability only. Gas is purchased for injection during the off-peak period for use in the high demand months, but is again limited in its impact on the overall price. The LNG plant is currently leased from a third party, and the PUCN has
authorized other companiescontract expires in July 2005. While
negotiations continue between the owner of the plant and Paiute to allow for the purchase of the facility, preparations are being made to provide alternatives to the leased facility to be in service underby July 2005.
Gas supplies for the southern system of Southwest (Arizona, southern Nevada, and southern California properties) are primarily obtained from producing regions in Colorado and New Mexico (San Juan basin), Texas (Permian basin), and Rocky Mountain areas. For its northern system (northern Nevada and northern California properties), Southwest primarily obtains gas from Rocky Mountain producing areas and from Canada.
Southwest arranges for transportation of gas to its Arizona, Nevada, and California service territories through the pipeline systems of El Paso Natural Gas Company (“El Paso”), Kern River Gas Transmission Company (“Kern River”), Transwestern Pipeline Company, Northwest Pipeline Corporation, Southern California Gas Company and Paiute. Supply and pipeline capacity availability on both short- and long-term bases is continually monitored by Southwest to ensure the reliability of service to its customers. Southwest currently receives firm transportation service, both on a short- and long-term basis, for all of its service territories on the pipeline systems noted above, and also has interruptible contracts in place that allow additional capacity to be acquired should an alternative planunforeseen need arise.
The Company believes that the current level of regulation, Southwest could continuecontracted firm interstate capacity is sufficient to provideserve each of its service under its regulated
rates, or set up a new subsidiary and file for an affiliateterritories. As the need arises to offer service.
The detailsacquire additional capacity on one of the PUCN restructuring plan are not fully developed at this time.
Also remaining are numerous issues such as unbundling rates, licensing of
alternative sellers, the utility's obligationinterstate pipeline transmission systems, primarily due to serve, and recovery of stranded
costs.
California
In January 1998, the CPUC opened a rulemaking proceeding designed to reform
the California natural gas industry by expanding opportunities for residential
and small commercial customers to have access to competing natural gas
suppliers. To accomplish this, the CPUC requested comments from interested
parties, such ascustomer growth, Southwest to assess the current market and regulatory
framework for the California natural gas industry and to develop reforms which
emphasize market-oriented policies to benefit all California natural gas
consumers. Southwest filed written comments with the CPUC in February 1998
addressing such issues as regulatory streamlining, unbundling, consumer
protection and other competitive issues. The CPUC Division of Strategic Planning
recommended that gas utilities fully unbundle services and exit the gas merchant
(gas supply) business.
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The CPUC established working groups to address safety concerns associated
with introducing competition in providing billing, metering, and services on the
customer side of the meter, and to develop consistency in policies, programs,
tariffs, rules, and procedures used by gas utilities throughout the state.
Reports from the working groups were submitted in August 1998.
While the CPUC initially adopted an aggressive timetable for restructuring
the gas industry, legislation was enacted late in 1998 delaying the CPUC ability
to restructure the gas industry for residential customers until 2000 and
requiring the CPUC to report to the legislature whether such restructuring is in
the public interest. The CPUC will continue to hold hearings and take evidence
in preparationconsider available options to obtain that capacity, either through the use of firm contracts with a pipeline company or by purchasing capacity on the open market.
Southwest is dependent upon the El Paso pipeline system for the reporttransportation of gas to virtually all of its Arizona service territories. Historically, Southwest received transportation service from El Paso to its Arizona service territories under a full requirements contract. Under full requirements service, El Paso was obligated to transport all of a customer’s gas requirements each day, and the legislature regarding naturalcustomer was obligated to have El Paso, and only El Paso, transport its requirements. Virtually all of El Paso’s customers in Arizona, New Mexico, and Texas have been full requirements customers, while El Paso has transported gas restructuring.
Arizona
Southwest agreed, as partfor its customers in California and Nevada subject to a specific maximum daily quantity, or contract demand limitation.
Since November 1999, the Federal Energy Regulatory Commission has been examining capacity allocation issues on the El Paso system in several proceedings. This examination resulted in a series of orders by the FERC in which all of the 1997major full requirements transportation service agreements on the El Paso system, including the agreement by which Southwest obtained the transportation of gas supplies to its Arizona rate case settlement,service areas, were converted to contract demand-type service agreements, with fixed maximum service limits, effective September 2003. At that time, all of the transportation capacity on the system was allocated among the shippers. In order to help ensure that the converting full requirements shippers would have adequate capacity to meet their needs, El Paso was authorized to expand the eligibilitycapacity on its system by adding compression.
The FERC is continuing to examine issues related to the implementation of the full requirements conversion. Petitions for customersjudicial review of the FERC’s orders mandating the conversion have been filed.
Management believes that it is difficult to qualifypredict the ultimate outcome of the proceedings or the impact of the FERC action on Southwest. Southwest has had adequate capacity for transportation service.
Southwest also supported a proposalits customers’ needs during the 2003/2004 heating season to open an investigationdate and management believes adequate capacity exists for the remainder of the heating season. Additional costs may be incurred to address
competitionacquire capacity in the natural gas industry, including the unbundling of rates and
services, which was filed in May 1998 by a potential competitor of Southwest. No
action has been taken on this proposal to date. In July 1998, Southwest filed a
proposal that would provide all customers with the option of choosing their own
gas suppliers by January 2000. The proposal was suspended into 1999 to allow gas
marketers and other interested parties additional time to study the proposal.
In May 1998, the Arizona Legislature approved House Bill 2663 (Bill),
providing for electric generation service competition and confirming the
authority of the ACC to open the service territories of the electric companies
within the state to competition. The customer choice provisions of the Bill
directed that during the initial construction of a residential structure,
electric and natural gas facilities, at a minimum, shall be installed in and to
the structure in a manner that provides the retail energy consumer with the
capability to choose between electricity and natural gas as an energy source for
each appliance application. Therefore,future as a result of this provision of the Bill, Southwest and other natural gas utilities inFERC order. However, it is anticipated that any additional costs would be collected from customers principally through the state of Arizona are
assured that a natural gas option is available to all future customers.
COMPETITION
PGA mechanism.
Electric utilities are Southwest'sthe principal competitors of Southwest for the residential and small commercial markets throughout its service areas. Competition for space heating, general household, and small commercial energy needs generally occurs at the initial installation phase when the customer/builder typically makes the decision as to which type of equipment to install and operate. The customer will generally continue to use the chosen energy source for the life of the equipment. As a result of its success in these markets, Southwest has experienced consistent growth among the residential and small commercial customer classes.
Unlike residential and small commercial customers, certain large commercial, industrial, and electric generation customers have the capability to switch to alternative energy sources. To date, Southwest has been successful in retaining most of these customers by setting rates at levels competitive with alternative energy sources such as electricity, fuel oils, and coal. As a result,However, increases in natural gas prices, if sustained for an extended period of time, may impact Southwest’s ability to retain some of these customers. Overall, management does not anticipate any material adverse impact on its operating margin from fuel switching.
Southwest continues to compete with interstate transmission pipeline companies, such as El Paso, Natural Gas Company (El Paso), Kern River, Gas
Transmission Company (Kern River), and Tuscarora Gas Transmission Company, to provide service to certain large end-users. End-use customers located in close proximity to these interstate pipelines pose a potential bypass threat and, therefore,
requirethreat. Southwest attempts to closely monitor each customer situation and provide competitive service in order to retain the customer. Southwest has maintained an intensive effort to mitigate theseremained competitive
threats through the use of discountednegotiated transportation contract rates, special long-term contracts with electric generation and cogeneration customers, and newother tariff programs. One such program provides an opportunity for potential bypass
customers in Arizona to purchase natural gas-related services as a bundled
package, including the procurement of gas supply. Southwest enters into gas
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supply contracts for eligible customers, which are not included in its system
supply portfolio, and provides nomination and balancing services on behalf of
the customer. This program, as well as otherThese competitive response initiatives and otherwise competitive rates, has helped mitigatehave mitigated the financial impact from
the threat of bypass and the potential loss of margin currently earned from large customers.
DEMAND FOR NATURAL GAS
Deliveries of natural gas by Southwest are made under a priority system
established by each regulatory commission having jurisdiction over Southwest.
The priority system is intended to ensure that the gas requirements of
higher-priority customers, primarily residential customers and nonresidential
customers who use 500 therms of gas per day or less, are fully satisfied on a
daily basis before lower-priority customers, primarily electric utility and
large industrial customers able to use alternative fuels, are provided any
quantity of gas or capacity.
Demand for natural gas is greatly affected by temperature. On cold days,
use of gas by residential and commercial customers may be as much as eight times
greater than on warm days because of increased use of gas for space heating. To
fully satisfy this increased high-priority demand, gas is withdrawn from storage
or peaking supplies are purchased from suppliers. If necessary, service to
interruptible lower-priority customers may be curtailed to provide the needed
delivery system capacity. Southwest maintains no backlog on its orders for gas
service.
Natural gas vehicles (NGVs) represent a nontraditional source of demand for
natural gas. Southwest encourages the use of NGVs throughout its service
territories. As of December 31, 1998, there were 48 public- and nonpublic-access
fueling stations and approximately 5,500 NGVs in use throughout Southwest
service territories. As more public fueling stations come on-line and stricter
vehicle emission standards are adopted, the demand for NGVs should increase.
NATURAL GAS SUPPLY
Southwest is responsible to acquire (purchase) and arrange delivery of
(transport) natural gas to its system for all sales customers. Southwest
believes that natural gas supplies and pipeline capacity for transportation will
remain plentiful and readily available.
The primary objective of Southwest with respect to gas supply is to ensure
that adequate, as well as economical, supplies of natural gas are available from
reliable sources. Gas is acquired from a wide variety of sources, including
suppliers on the spot market and those who provide firm supplies over short-term
and longer-term durations. During 1998, Southwest acquired gas supplies from
approximately 70 suppliers. This practice provides security against
nonperformance by any one supplier.
Balancing firm supply assurances against the associated costs dictates a
continually changing natural gas purchasing mix within the supply portfolios.
The current purchasing strategy of Southwest primarily involves
competitively-bid firm volumetric contracts with variable or index-based
pricing. This strategy allows Southwest to acquire gas at current market prices
but can result in price volatility. In managing its gas supply portfolio,
Southwest does not currently utilize stand-alone derivative financial
instruments, but may do so in the future to hedge against possible price
increases and help mitigate the regulatory risk of a gas cost disallowance
during periods of rising prices. Any such change would be undertaken only with
regulatory commission authorization.
Natural gas prices have historically demonstrated seasonal volatility with
higher prices in the heating season and lower prices during the summer or
off-peak consumption period. The latter part of 1996 and early 1997 witnessed
particularly steep price increases, whereas the two most recent winter periods
experienced more typical seasonal price volatility.
Gas supplies for the Southwest southern system (Arizona, southern Nevada,
and southern California properties) are primarily obtained from producing
regions in New Mexico (San Juan basin), Texas (Permian basin), and Rocky
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Mountain areas. For its northern system (northern Nevada and northern California
properties), Southwest primarily obtains gas from Rocky Mountain producing areas
and from Canada.
Southwest arranges for transportation of gas to its Arizona, Nevada, and
California service territories through the pipeline systems of El Paso, Kern
River, Northwest Pipeline Corporation, and Southern California Gas Company.
Supply and pipeline capacity availability on both short- and long-term bases are
continually monitored by Southwest to ensure the continued reliability of
service to its customers. Southwest currently receives firm transportation
service, both on a short- and long-term basis, for all of its service
territories on the four pipeline systems noted above, and has interruptible
contracts in place that allow additional capacity to be acquired as needed.
The current level of contracted firm interstate capacity is sufficient to
serve each of the service territories. As the need arises to acquire additional
capacity on one of the interstate pipeline transmission systems, primarily due
to customer growth, Southwest considers available options to obtain the
capacity, either through the use of firm contracts with a pipeline company or by
purchasing capacity on the open market. While firm contracts provide stability
and guaranteed rights to capacity, they are generally a more expensive
alternative.
Southwest continues to evaluate natural gas storage as an option to enable
it to take advantage of seasonal price differentials in obtaining natural gas
from a variety of sources to meet the growing demand of its customers.
ENVIRONMENTAL MATTERS
Federal, state, and local laws and regulations governing the discharge of materials into the environment have had little direct impact upon Southwest. Environmental efforts, with respect to matters such as protection of endangered species and archeological finds, have increased the complexity and time required to obtain pipeline rights-of-way and construction permits. However, increased environmental legislation and regulation are also beneficial to the natural gas industry. Because natural gas is one of the most environmentally safe fossil fuels currently available, its use helpscan help energy users to comply with stricter environmental standards.
EMPLOYEES
At December 31, 1998,2003, the natural gas operations segment had 2,4292,550 regular full-time equivalent employees.employees, of which 507 full-time equivalent non-exempt employees in central Arizona were represented by the International Brotherhood of Electrical Workers. No other natural gas operations segment employees are represented by a union. Southwest believes it has a good relationship with its employees. Noemployees and that compensation, benefits, and working conditions afforded its employees are represented by a union.
Reference is hereby madecomparable to Item 10those generally found in Part III of this report on Form 10-K
for information relative to the executive officers of the Company.
utility industry.
Northern Pipeline Construction Co. (Northern or the construction services
segment) is a full-service underground piping contractor whichthat provides utility companies with trenching and installation, replacement, and maintenance services for energy distribution systems. NorthernNPL contracts primarily with LDCs to install, repair, and maintain energy distribution systems from the town border station to the end-user meter.end-user. The primary focus of business operations is main and service replacement as well as new business installations. Construction work varies from relatively small projects to the piping of entire communities. Construction activity is seasonal.seasonal in most areas. Peak construction periods are the summer and fall months in colder climate areas, such as the Midwest.midwest. In the warmer climate areas, such as the southwestern United States, construction continues year round.
Northern
NPL business activities are often concentrated in utility service territories where existing gasenergy lines are scheduled for replacement. An LDC will typically contract with NorthernNPL to provide pipe replacement services and new line installations. Contract terms generally specify unit priceunit-price or fixed-price arrangements. Unit priceUnit-price contracts establish prices for all of the various services to be performed during the contract period. These contracts often have annual 6
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pricing reviews. During 1998, more than 892003, approximately 94 percent of revenue was earned under unit priceunit-price contracts. As of December 31, 19982003 no significant backlog existsexisted with respect to outstanding construction contracts.
Materials used by NPL in its pipeline construction activities are typically specified, purchased, and supplied by NPL’s customers. Construction contracts also contain provisions which make customers generally liable for remediating environmental hazards encountered during the construction process. Such hazards might include digging in an area that was contaminated prior to construction, finding endangered animals, digging in historically significant sites, etc.
Otherwise, NPL’s operations have minimal environmental impact (dust control, normal waste disposal, handling harmful materials, etc.).
Competition within the industry ishas traditionally been limited to several regional competitors in what can be characterized ashas been a largely fragmented industry. NorthernSeveral national competitors also exist within the industry. NPL currently operates in approximately 1517 major markets nationwide. Its customers are the primary LDCs in those markets. Construction companies typically depend
on a fewDuring 2003, NPL served 41 major customers, with Southwest accounting for approximately 30 percent of their business. During 1998, Southwestrevenues. With the exception of one other customer that accounted for 32approximately 12 percent of Northernrevenue, no other customer had a relatively significant contribution to NPL revenues. No other customers contributed more than 10
percent of revenues.
Employment fluctuates between seasonal construction periods, which are normally heaviest in the summer and fall months. At December 31, 1998, Northern2003, NPL had 1,2671,822 regular full-time equivalent employees. Employment peaked in November
1998May 2003 when there were 1,6212,040 employees. The majority of the employees are represented by unions and are covered by collective bargaining agreements, which is typical of the utility construction industry.
Operations are conducted from 17 field locations with corporate headquarters located in Phoenix, Arizona. All buildings are leased from third parties. The lease terms are typically two to three years.five years or less. Field location facilities consist of a small building for repairs and acreageland to store equipment.
ITEM
NPL is not directly affected by regulations promulgated by the ACC, PUCN, CPUC or FERC in its construction services. NPL is an unregulated construction subsidiary of Southwest Gas Corporation. However, because NPL performs work for the regulated natural gas segment of the Company, its construction costs are subject indirectly to “prudency reviews” just as any other capital work that is performed by third parties or directly by Southwest. However, such “prudency reviews” would not bring NPL under the regulatory jurisdiction of any of the commissions noted above.
Although the Company is not able to predict all factors that may affect future results, described below are some of the risk factors identified by the Company that may have a negative impact on our future financial performance or affect whether we achieve the goals or expectations expressed or implied in any forward-looking statements contained herein. Unless indicated otherwise, references below to “we,” “us” and “our” should be read to refer to Southwest Gas Corporation and its subsidiaries.
Our liquidity, and in certain circumstances our earnings, may be reduced during periods in which natural gas prices are rising significantly or are more volatile.
Rate schedules in each of our service territories contain purchased gas adjustment clauses which permit us to file for rate adjustments to recover increases in the cost of purchased gas. Increases in the cost of purchased gas have no direct impact on our profit margins, but do affect cash flows and can therefore impact the amount of our capital resources. We have used short-term borrowings in the past to temporarily finance increases in purchased gas costs, and we expect to do so during 2004, if the need again arises.
We may file requests for rate increases to cover the rise in the costs of purchased gas. Due to the nature of the regulatory process, there is a risk of a disallowance of full recovery of these costs during any period in which there has been a substantial run-up of these costs or our costs are more volatile. Any disallowance of purchased gas costs may reduce cash flow and earnings.
Increases in the cost of natural gas may arise from a variety of factors, including weather, changes in demand, the level of production and availability of natural gas, transportation constraints, transportation capacity cost increases, federal and state energy and environmental regulation and legislation, the degree of market liquidity, natural disasters, wars and other catastrophic events, and the success of our strategies in managing price risk.
Governmental policies and regulatory actions can reduce our earnings.
Governmental policies and regulatory actions, including those of the ACC, the CPUC, the FERC, and the PUCN relating to allowed rates of return, rate structure, purchased gas and investment recovery, operation and construction of
facilities, present or prospective wholesale and retail competition, changes in tax laws and policies, and changes in and compliance with environmental and safety laws and policies, can reduce our earnings. Risks and uncertainties relating to delays in obtaining regulatory approvals, conditions imposed in regulatory approvals, or determinations in regulatory investigations can also impact financial performance.
We are unable to predict what types of conditions might be imposed on Southwest or what types of determinations might be made in pending or future regulatory proceedings or investigations. We nevertheless believe that it is not uncommon for conditions to be imposed in regulatory proceedings, for Southwest to agree to conditions as part of a settlement of a regulatory proceeding, or for determinations to be made in regulatory investigations that will reduce our earnings and liquidity. For example, we may request recovery of a particular operating expense in a general rate case filing that a regulator disallows.
Significant customer growth in Arizona and Nevada could strain our capital resources.
We continue to experience significant population and customer growth throughout our service territories. During 2003, we added 67,000 customers, a five percent growth rate. Another 9,000 customers were added in October 2003 with the BMG acquisition. Over the past ten years, customer growth has averaged five percent per year. This growth has required large amounts of capital to finance the investment in new transmission and distribution plant. In 2003, our natural gas construction expenditures totaled $228 million. Approximately 72 percent of these current-period expenditures represented new construction, and the balance represented costs associated with routine replacement of existing transmission, distribution, and general plant.
Cash flows from operating activities (net of dividends) have been inadequate, and are expected to continue to be inadequate, to fund all necessary capital expenditures. We have funded this shortfall through the issuance of additional debt and equity securities, and expect to continue to do so. However, our ability to issue additional securities is dependent upon, among other things, conditions in the capital markets, regulatory authorizations, and our level of earnings.
Significant customer growth in Arizona and Nevada could also impact earnings.
Our ability to earn the rates of return authorized by the ACC and the PUCN is also more difficult because of significant customer growth. The rates we charge our distribution customers in Arizona and Nevada are derived using rate base, cost of service, and cost of capital experienced in a historical test year, as adjusted. This results in “regulatory lag” which delays our recovery of some of the costs of capital improvements and operating costs from customers in Arizona and Nevada.
Our earnings are greatly affected by variations in temperature during the winter heating season.
The demand for natural gas is seasonal and is greatly affected by temperature. Variability in weather from normal temperatures can materially impact results of operations. On cold days, use of gas by residential and commercial customers may be as much as six times greater than on warm days because of the increased use of gas for space heating. Weather has been and will continue to be one of the dominant factors in our financial performance.
Uncertain economic conditions may affect our ability to finance capital expenditures.
Our ability to finance capital expenditures and other matters will depend upon general economic conditions in the capital markets. The direction of interest rates is uncertain. Declining interest rates are generally believed to be favorable to utilities while rising interest rates are believed to be unfavorable because of the high capital costs of utilities. In addition, our authorized rate of return is based upon certain assumptions regarding interest rates. If interest rates are lower than assumed rates, our authorized rate of return in the future could be reduced. If interest rates are higher than assumed rates, it will be more difficult for us to earn our currently authorized rate of return.
A significant reduction in our credit ratings could materially and adversely affect our business, financial condition and results of operations.
We cannot be certain that any of our current ratings will remain in effect for any given period of time or that a rating will not be lowered or withdrawn entirely by a rating agency if, in its judgment, circumstances in the future so
warrant. Any downgrade could increase our borrowing costs, which would diminish our financial results. We would likely be required to pay a higher interest rate in future financings, and our potential pool of investors and funding sources could decrease. A downgrade could require additional support in the form of letters of credit or cash or other collateral and otherwise adversely affect our business, financial condition and results of operations.
The plant investment of Southwest consists primarily of transmission and distribution mains, compressor stations, peak shaving/storage plants, service lines, meters, and regulators, which comprise the pipeline systems and facilities located in and around the communities served. Southwest also includes other properties such as land, buildings, furnishings, work equipment, vehicles, and vehiclessoftware systems in plant investment. The northern Nevada and northern California properties of Southwest are referred to as the northern system; the Arizona, southern Nevada, and southern California properties are referred to as the southern system. Several properties are leased by Southwest, including an LNG storage plant on
itsin northern Nevada, system and a portion of the corporate headquarters office complex located in Las Vegas, Nevada.Nevada, and the administrative offices in Phoenix, Arizona. Total gas plant, exclusive of leased property, at December 31, 1998,2003 was $2.1$3.1 billion, including construction work in progress. It is the opinion of management that the properties of Southwest are suitable and adequate for its purposes.
Substantially all gas main and service lines of Southwest are constructed across property owned by others under right-of-way grants obtained from the record owners thereof, on the streets and grounds of municipalities under authority conferred by franchises or otherwise, or on public highways or public lands under authority of various federal and state statutes. None of the numerous county and municipal franchises are exclusive, and some are of limited duration. These franchises are renewed regularly as they expire, and Southwest anticipates no serious difficulties in obtaining future renewals.
With respect to the right-of-way grants, Southwest has had continuous and uninterrupted possession and use of all such rights-of-way, and the associated gas mains and service lines, commencing with the initial stages of the construction of such facilities. Permits have been obtained from public authorities and other governmental entities in certain instances to cross or to lay facilities along roads and highways. These permits typically are revocable at the election of the grantor and Southwest occasionally must relocate its facilities when requested to do so by the grantor. Permits have also been obtained from railroad companies to cross over or under railroad lands or rights-of-way, which in some instances require annual or other periodic payments and are revocable at the grantors' elections.
election of the grantors.
Southwest operates two primary pipeline transmission systems: (i) a system owned by Paiute, a wholly owned subsidiary, extending from the Idaho-Nevada border to the Reno, Sparks, and Carson City areas and communities in the Lake Tahoe area in both California and Nevada and other communities in northern and western Nevada; and (ii) a system extending from the Colorado River at the southern tip of Nevada to the Las Vegas distribution area.
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The following map below shows the locations of major Southwest facilities and transmission lines, and principal communities to which Southwest supplies gas either as a wholesaler or distributor. The map also shows major supplier transmission lines that are interconnected with the Southwest systems.
[MAP]
[THE FOLLOWING TEXT TO BE INSERTED IN EDGAR VERSION ONLY]
[DESCRIPTION: Map
Information on properties of Arizona, Nevada, and California indicating the
locationNPL can be found on page 6 of Southwest service areas. Service areas in Arizona include most of
the central and southern areas of the state including Phoenix, Tucson, Yuma, and
surrounding communities. Service areas in northern Nevada include Carson City,
Yerington, Fallon, Lovelock, Winnemucca, and Elko. Service areas in southern
Nevada include the Las Vegas valley (including Henderson and Boulder City) and
Laughlin. Service areas in southern California include Barstow, Big Bear,
Needles, and Victorville. Service areas in northern California include the north
shore of Lake Tahoe and portions of Truckee. Companies providing gas
transportation services for the Company are indicated by showing the location of
their pipelines. Major transporters include El Paso Natural Gas Company, Kern
River Gas Transmission Company, Northwest Pipeline Corporation, and Southern
California Gas Company. The location of the Paiute Pipeline Company transmission
pipeline (extending from the Idaho/Nevada border to the Reno/Tahoe area) and
Southwest's pipeline (extending from Laughlin/Bullhead City to the Las Vegas
valley) are indicated. The LNG facility is located near Lovelock, Nevada.]
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The information appearing in Part I, this Form 10-K under Construction Services.
Item 1, pages 6 and 7 with respect to
the construction services segment is incorporated herein by reference.
ITEM 3. LEGAL PROCEEDINGS
The Company has beenis named as a defendant in various legal proceedings. The ultimate dispositions of these proceedings are not presently determinable; however, it is the opinion of management that nonone of this litigation to whichindividually or in the Company
is subjectaggregate will have a material adverse impact on itsthe Company’s financial position or results of operations.
On December 16, 1998, Arthur Klein, a purported shareholder of the Company,
filed a Complaint in the Superior Court of the State of California in San Diego
County (Case No. 726615) against the Company and its directors alleging one
cause of action for breach of fiduciary duty. The plaintiff alleges that the
consideration for the proposed merger with ONEOK is unfair and inadequate
because the Company's Board of Directors approved the definitive agreement with
ONEOK without conducting any auction or using another "market check" mechanism.
Plaintiff is proposing to represent a class of all shareholders of the Company
(excluding defendants and their affiliates and families). On March 22, 1999, the
plaintiff filed an Amended Complaint in which he alleges causes of action for
breach of fiduciary duty of loyalty and due care and breach of duty of candor.
By his Amended Complaint, plaintiff seeks
* to enjoin the merger with ONEOK,
* to rescind the definitive agreement with ONEOK,
* to implement an auction of the Company or similar process,
* to void the $30 million termination fee in the definitive agreement
with ONEOK in the event the definitive agreement with ONEOK is
terminated, the Company's Board of Directors recommends another
transaction, such as the merger proposed by Southern Union Company, or
in other similar circumstances, and
* unspecified damages.
The court has ordered the parties to conduct limited discovery and set a
preliminary injunction schedule, which, if followed, would result in a
telephonic ruling on plaintiff's motion for a preliminary injunction in May
1999.
The Company believes that it has valid defenses to plaintiff's claims.
ITEM
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM
Item 5. MARKET FOR REGISTRANT'SREGISTRANT’S COMMON EQUITY, AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The principal markets on which the common stock of the Company is traded are the New York Stock Exchange and the Pacific Stock Exchange. At March 15,
1999,1, 2004, there were 24,18623,259 holders of record of common stock, and the market price of the common stock was $27.$23.45. The quarterly market price of, and dividends on, Company common stock required by this item are included in the 19982003 Annual Report to Shareholders filed as an exhibit hereto and are incorporated herein by reference.
ITEM
The Company has a common stock dividend policy which states that common stock dividends will be paid at a prudent level that is within the normal dividend payout range for its respective businesses, and that the dividend will be established at a level considered sustainable in order to minimize business risk and maintain a strong capital structure throughout all economic cycles. The quarterly common stock dividend was 20.5 cents per share throughout 2003. The dividend of 20.5 cents per share has been paid quarterly since September 1994.
Item 6. SELECTED FINANCIAL DATA
Information required by this item is included in the 19982003 Annual Report to Shareholders and is incorporated herein by reference.
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ITEM
Item 7. MANAGEMENT'SMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Information required by this item is included in the 19982003 Annual Report to Shareholders and is incorporated herein by reference.
ITEM
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM
Information required by this item is included in the 2003 Annual Report to Shareholders under the heading “Management’s Discussion and Analysis” and under Notes 6 and 7 of the Notes to Consolidated Financial Statements and is incorporated herein by reference. Other risk information is included under the heading “Company Risk Factors” inItem 1. Business of this report.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of Southwest Gas Corporation and Notes thereto, together with the reportreports of PricewaterhouseCoopers LLP, Independent Auditors, and Arthur Andersen LLP, Independent Public Accountants, are included in the 19982003 Annual Report to Shareholders and are incorporated herein by reference.
ITEM
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
On May 28, 2002, the Company dismissed Arthur Andersen LLP as its independent auditor. The decision to dismiss Arthur Andersen was recommended by the Company’s Audit Committee and approved by its Board of Directors.
Arthur Andersen’s report on the financial statements of the Company for the year ended December 31, 2001 did not contain an adverse opinion or a disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope, or accounting principles.
During the years ended December 31, 2000 and 2001, and the interim period between December 31, 2001 and May 28, 2002, there were no disagreements between the Company and Arthur Andersen on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Arthur Andersen, would have caused it to make reference to the subject matter of the disagreements in connection with its report. During the years ended December 31, 2000 and 2001, and the interim period between December 31, 2001 and May 28, 2002, there were no reportable events (as defined in Item 304(a)(1)(v) of Regulation S-K promulgated by the SEC). In May 2002, Arthur Andersen furnished the Company with a letter addressed to the SEC stating that it agrees with the statements above. A copy of the letter was included as an exhibit to the Form 8-K filed by the Company in May 2002.
The Company engaged PricewaterhouseCoopers LLP as its independent auditor, effective May 28, 2002. During the years ended December 31, 2000 and 2001, and the interim period between December 31, 2001 and May 28, 2002, neither the Company nor anyone on its behalf consulted with PricewaterhouseCoopers LLP regarding (i) the application of accounting principles to a specified transaction, either completed or proposed, (ii) the type of audit opinion that might be rendered on the Company’s financial statements, or (iii) any matter that was either the subject of a disagreement (as described above) or a reportable event.
The Company has not been able to obtain, after reasonable efforts, the written consent of Arthur Andersen to the incorporation by reference in the Company’s previously filed Form S-3 Registration Statements (Nos. 333-98995 and 333-106419) and Form S-8 Registration Statements (Nos. 333-31223, 333-106762 and 333-111034) of the report of Arthur Andersen on the 2001 financial statements included in this Annual Report, as required by the Securities Act of 1933. Therefore, in reliance on Rule 437a promulgated under the Securities Act of 1933, the Company has dispensed with the requirement to file a written consent from Arthur Andersen with this Annual Report. As a result, the ability of persons who purchase the Company’s securities pursuant to these Registration Statements to assert claims against Arthur Andersen may be limited.
Because the Company has not been able to obtain the written consent of Arthur Andersen, such persons may not have an effective remedy against Arthur Andersen for any untrue statements of a material fact contained in Arthur Andersen’s report or the financial statements covered thereby or any omissions to state a material fact required to be stated therein.
Item 9A. CONTROLS AND PROCEDURES
The Company has established disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and benefits of controls must be considered relative to their costs. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or management override of the control. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Based on the most recent evaluation, as of December 31, 2003, management of the Company, including the Chief Executive Officer and Chief Financial Officer, believe the Company’s disclosure controls and procedures are effective at attaining the level of reasonable assurance noted above.
There have been no changes in the Company’s internal controls over financial reporting during the fourth quarter that have materially affected, or are likely to materially affect, the Company’s internal controls over financial reporting.
PART III
ITEM
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a)Identification of Directors. The names Information with respect to Directors is set forth under the heading “Election of the members of the Board of
Directors, the principal occupation of each member and his or her employer for
the last five years or longer, and the principal business of the corporation or
other organization, if any, in which such occupation or employment is carried
on, follow.
GEORGE C. BIEHL
Senior Vice President, Chief Financial Officer & Corporate Secretary
Southwest Gas Corporation
Director Since: 1998
Board Committees: Finance
Mr. Biehl, 51, joined the Company in 1990 as Senior Vice President and
Chief Financial Officer after serving in a number of capacities with Deloitte
Haskins & Sells (now Deloitte & Touche) for sixteen years and as chief financial
officer for PriMerit Bank for the five years before joining the Company. He also
assumed the responsibilities as Corporate Secretary for the Company in 1996. Mr.
Biehl graduated from Ohio State University with a degree in accounting and
earned his MBA with an emphasis in finance from Columbia University. He is a
licenced CPA in several states and is a member of the American Institute of
Certified Public Accountants. He is also a member of the Las Vegas Chamber of
Commerce Leadership Las Vegas Program, and serves on the finance committees of
several trade association groups.
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MANUEL J. CORTEZ
President and Chief Executive Officer
Las Vegas Convention and Visitors Authority
Director Since: 1991
Board Committees: Audit (Chairman), Compensation, Pension Plan Investment
Mr. Cortez, 60, served four terms (1977-1990) on the Clark County
Commission and is a former chairman of the Commission. He has been active on
various boards, including the Environmental Quality Policy Review Board, the Las
Vegas Valley Water District Board of Directors, and the University Medical
Center Board of Trustees, and served as chairman of the Liquor and Gaming
Licensing Board and the Clark County Sanitation District. He has also held
leadership roles with numerous civic and charitable organizations such as Boys
and Girls Clubs of Clark County, Lied Discovery Childrens Museum, and Boys Town.
Currently, Mr. Cortez holds professional membershipsDirectors” in the American Society of
Association Executives, the Professional Convention Managers Association, the
International Association of Convention and Visitors Bureaus, the American
Society of Travel Agents, anddefinitive 2004 Proxy Statement, which by this reference is on the board of directors for the Travel
Industry Association of America.
LLOYD T. DYER
Retired President and Chief Executive Officer
Harrah's
Director Since: 1978
Board Committees: Executive, Compensation (Chairman), Nominating
Mr. Dyer, 71, obtained a degree in banking and finance from the University
of Utah prior to his employment with Harrah's, a hotel/gaming corporation with
its principal facilities in Reno and Lake Tahoe, in 1957. He was elected
president and chief operating officer of Harrah's in 1975, and elected president
and chief executive officer in 1978. He remained in those positions with
Harrah's until his retirement in April 1980. Mr. Dyer is a trustee of the
William F. Harrah Trusts.
THOMAS Y. HARTLEY
Chairman of the Board, Southwest Gas Corporation
President and Chief Operating Officer, Colbert Golf Design and Development
Director Since: 1991
Board Committees: Executive (Chairman), Compensation, Nominating
Mr. Hartley, 65, obtained his degree in business from Ohio University in
1955, and was employed in various capacities by Deloitte Haskins & Sells (now
Deloitte & Touche) from 1959 until his retirement as an area managing partner in
1988. He joined Southwest Gas Corporation as Director in 1991 and was elected
Chairman of the Board of Directors in 1997. Mr. Hartley is actively involved in
numerous business and civic activities. He is a past chairman of the UNLV
Foundation and the Nevada Development Authority, and past president of the Las
Vegas Founders Club. He has also held voluntary executive positions with the Las
Vegas Founders Golf Foundation, the Las Vegas Chamber of Commerce, and the
Boulder Dam Area Council of the Boy Scouts of America. He is a director of
Sierra Health Services, Inc. and AmeriTrade Holdings Corporation.
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MICHAEL B. JAGER
Private Investor
Director Since: 1989
Board Committees: Audit, Finance, Pension Plan Investment (Chairman)
Mr. Jager, 67, obtained a degree in petroleum geology from Stanford
University in 1955. After a four-year employment with the Richfield Oil
Corporation as a petroleum geologist, he joined Frank H. Ayres & Son
Construction Company and was involved in the construction of subdivisions and
homes in southern California until 1979. Since that time he has consulted in the
single family residential development industry, and owns and manages a number of
businesses in Nevada.
LEONARD R. JUDD
Former President, Chief Operating Officer, and Director
Phelps Dodge Corporation
Director Since: 1988
Board Committees: Executive, Compensation, Nominating (Chairman)
Mr. Judd, 60, former president, chief operating officer, and director of
Phelps Dodge Corporation, joined Phelps Dodge in 1963 and worked at that
company's operations in Arizona, New Mexico, and New York City. He was elected
to the Phelps Dodge board of directors in 1987, president of Phelps Dodge Mining
Company in 1988, and became president and chief operating officer of Phelps
Dodge in 1989. He remained in those positions until the end of 1991. Mr. Judd is
a member of various professional organizations and is active in numerous civic
groups. He serves as a director of Morrison-Knudsen Corporation.
JAMES J. KROPID
President of James J. Kropid Investments
Director Since: 1997
Board Committees: Executive, Compensation, Finance
Mr. Kropid, 61, received his undergraduate degree from DePaul University
and participated in the executive development program at the University of
Illinois. He joined Centel Corporation in 1961 and became president of its
Central Telephone Company-Nevada/Texas division in 1987. In 1993, the Governor
of Nevada appointed him to the position of general manager of the Nevada State
Industrial Insurance System, a position in which he served for almost two years.
He is currently president of his own investment company. Mr. Kropid holds
executive and board positions with various civic and charitable organizations
including the National Conference for Community and Justice (formerly known as
the National Conference of Christians and Jews), Las Vegas YMCA, and the Boy
Scouts of America. He was formerly a board member for the Nevada Development
Authority, United Way of Southern Nevada, and treasurer of St. Jude's Ranch for
Children. He is a director of the Golf Company of Nevada.
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MICHAEL O. MAFFIE
President and Chief Executive Officer
Southwest Gas Corporation
Director Since: 1988
Board Committees: Executive
Mr. Maffie, 51, joined the Company in 1978 as Treasurer after seven years
with Arthur Andersen & Co. He was named Vice President/Finance and Treasurer in
1982, Senior Vice President and Chief Financial Officer in 1984, Executive Vice
President in 1987, President and Chief Operating Officer in 1988, and President
and Chief Executive Officer in 1993. He received his undergraduate degree in
accounting and his MBA degree in finance from the University of Southern
California. He serves as a director of Del Webb Corporation, Boyd Gaming
Corporation, and Norwest Bank/Nevada Division. A member of various civic and
professional organizations, he serves as chairman of the board of United Way of
Southern Nevada and trustee and treasurer of the UNLV Foundation. He also is a
director of the Pacific Coast Gas Association and the Institute of Gas
Technology.
CAROLYN M. SPARKS
Co-Founder
International Insurance Services, Ltd.
Director Since: 1988
Board Committees: Audit, Finance (Chairperson), Pension Plan Investment
Mrs. Sparks, 57, graduated from the University of California Berkeley in
1963, and with her husband, co-founded International Insurance Services, Ltd.,
in 1966 in Las Vegas. She served on the University and Community College System
of Nevada Board of Regents from 1984 to 1996, and in 1991 was elected to a
two-year term as chair of the Board of Regents. Mrs. Sparks is actively involved
with numerous charitable and civic organizations, including founding and
chairing the University Medical Center Foundation and the Children's Miracle
Network Telethon. She is currently chair of the Nevada Children's Center
Foundation and has been elected to the Foundation Boards of the University of
Nevada Las Vegas and the Community College of Southern Nevada.
ROBERT S. SUNDT
Retired President
Sundt Corp.
Director Since: 1987
Board Committees: Executive, Finance, Nominating, Pension Plan Investment
Mr. Sundt, 72, has been associated with Sundt Corp. in a variety of
positions since 1948. He was named President of Sundt Corp. in 1983. He is now
retired and has no continuing association with Sundt Corp. He is a member of the
American Institute of Constructors, Consulting Constructors Council of America,
and a life director of the Associated General Contractors of America. He was a
member of the American Arbitration Association and has served as an arbitrator
on disputes concerning the construction industry. He is a past member of the
Construction Industry Presidents Forum. Mr. Sundt is affiliated with a number of
community organizations and is past chairman of the Tucson Metropolitan Chamber
of Commerce.
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TERRANCE "TERRY" L. WRIGHT
President and Chief Executive Officer
Nevada Title Insurance Company
Director Since: 1997
Board Committees: Audit, Compensation, Pension Plan Investment
Mr. Wright, 49, received his undergraduate degree in business
administration and his juris doctorate from DePaul University. He joined Chicago
Title Insurance Company while in law school and after graduation remained with
the company and eventually moved to the Las Vegas, Nevada office. In 1978, he
acquired the assets of Western Title to form what is now known as Nevada Title
Insurance Company. Mr. Wright is also associate general counsel for A.G. Spanos
Enterprises, Inc., one of the nation's largest apartment complex builders. He is
a member of the California and Illinois bar associations and is affiliated
professionally with the Las Vegas Board of Realtors, Nevada Land Title
Association, Las Vegas Executives, Opportunity Village, TPC board of governors,
Young President's Organization, and is past-chairman of the Nevada Development
Authority. Mr. Wright is also a trustee and an executive committee member of the
UNLV Foundation.
incorporated herein.
(b)Identification of Executive Officers. The name, age, position, and period position held during the last five years for each of the Executive Officers of the Company are as follows:
Name | Age | Position | Period Position | |||
Michael O. Maffie | 56 | Chief Executive Officer | 2003-Present | |||
| President and Chief Executive Officer | 1999-2003 | |||||
Jeffrey W. Shaw | 45 | President | 2003-Present | |||
| Senior Vice President/Gas Resources and Pricing | 2002-2003 | |||||
| Senior Vice President/Finance and Treasurer | 2000-2002 | |||||
| Vice President/Treasurer | 1999-2000 | |||||
George C. Biehl | 56 | Executive Vice President/Chief Financial Officer and | ||||
| Corporate Secretary | 2000-Present | |||||
| Senior Vice President/Chief Financial Officer and | ||||||
| Corporate Secretary | 1999-2000 | |||||
James P. Kane | 57 | Executive Vice President/Operations | 2000-Present | |||
| Senior Vice President/Operations | 1999-2000 | |||||
Edward S. Zub | 55 | Executive Vice President/Consumer Resources and | ||||
| Energy Services | 2000-Present | |||||
| Senior Vice President/Regulation and Product Pricing | 1999-2000 | |||||
James F. Lowman | 57 | Senior Vice President/ | 1999-Present | |||
Thomas R. Sheets | 53 | Senior Vice President/Legal Affairs and General Counsel | 2000-Present | |||
| Vice President/General Counsel | 1999-2000 | |||||
Dudley J. Sondeno | 51 | Senior Vice President/Chief Knowledge and | ||||
| Technology Officer | 1999-Present | |||||
Roy R. Centrella | 46 | Vice President/Controller and Chief Accounting Officer | 2002-Present | |||
| Controller | 2001-2002 | |||||
| �� | Assistant Controller | 1999-2001 | ||||
Kenneth J. Kenny | 41 | Treasurer | 2003-Present | |||
| Assistant Treasurer/Director Financial Services | 2000-2003 | |||||
| Senior Manager/Treasury | 1999-2000 |
(c)Identification of Certain Significant Employees.Employees. None.
(d)Family Relationships. None of the No Directors or Executive Officers are related to any other either by blood, marriage, or adoption.
(e)Business Experience. Information with respect to Directors is describedset forth under the heading “Election of Directors” in (a) above.the definitive 2004 Proxy Statement, which by this reference is incorporated herein. All Executive Officers have held responsible positions with the Company for at least five years as described in (b) above.
(f)Involvement in Certain Legal Proceedings. None.
(g)Promoters and Control Persons. None.
(h) Audit Committee Financial Expert. Information with respect to the financial expert of the Board of Directors’ audit committee is set forth under the heading “Committees of the Board” in the definitive 2004 Proxy Statement, which by this reference is incorporated herein.
(i) Identification of the Audit Committee. Information with respect to the composition of the Board of Directors’ audit committee is set forth under the heading “Committees of the Board” in the definitive 2004 Proxy Statement, which by this reference is incorporated herein.
Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a) of the Securities Exchange Act of 1934 requires officers and directors, and persons who own more than ten percent of a registered class of equity securities, to file reports of ownership and changes in ownership with the Securities and
Exchange Commission (SEC)SEC and the New York Stock Exchange. Officers, directors, and beneficial owners of more than ten percent of any class of equity securities are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.
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17
The Company has adopted procedures to assist its directors and executive officers in complying with Section 16(a) of the Securities and Exchange Act of 1934, as amended, which includes assisting in the preparation of forms for filing. For 19982003, all but onereports were timely filed.
Code of Business Conduct and Ethics.The Company has adopted a code of business conduct and ethics for its employees, including its chief executive officer, chief financial officer, chief accounting officer, and non-employee directors. A code of ethics is defined as written standards that are reasonably designed to deter wrongdoing and to promote: 1) honest and ethical conduct; 2) full, fair, accurate, timely, and understandable disclosure in reports and documents that a registrant files; 3) compliance with applicable governmental laws, rules, and regulations; 4) the prompt internal reporting of violations of the required reports were filed timely.code to an appropriate person or persons identified in the code; and 5) accountability for adherence to the code. The Form
4 listing acquisitions by Carolyn Sparks, as trustee and beneficiaryCompany’s Code of Business Conduct & Ethics can be viewed on the Company’s website (www.swgas.com). If any substantive amendments to the Code of Business Conduct & Ethics are made or any waivers are granted, including any implicit waiver, from a provision of the Sparks Family Trust,Code of 4,000 shares of Common Stock was not filed timely. An
amended Form 4 for Mrs. Sparks listingBusiness Conduct & Ethics, to the August 1998 purchase was filed in
January 1999.
ITEM 11. EXECUTIVE COMPENSATION
DIRECTORS COMPENSATION
Outside directors receive an annual retainer of $24,000, plus $1,000 for
each Board of Directors or committee meeting attended. Committee chairpersons
receive an additional $500 for each committee meeting attended. The Chairman of
the Board of Directors receives an additional $50,000 annually for serving in
that capacity. Directors who are full-time employees ofCompany’s chief executive officer, chief financial officer and chief accounting officer, the Company will disclose the nature of such amendment or its
subsidiaries receive no additional compensation for servicewaiver on the Board.
Each outside director received in May 1998, options to purchase 2,000
shares of the Common Stock under the provisions of the Option Plan. Under the
terms of the Option Plan, each outside director is entitled to receive
additional options to purchase 2,000 shares of the Common Stock on the date of
each Annual Meeting during the ten-year term of the Option Plan. The purchase
price for the options is the market price of the Common Stock on the date of the
grant and will become exercisable, in increments over three years, commencing
with the first anniversary of the grant. All options granted to the outside
directors will expire ten years after the date of each grant. The Option Plan
contains change in control provisions.
Outside directors may defer their compensation until retirement or
termination of their status as directors. Any cash they receive from the
cancellation of any outstanding options as a result of a change in control of
the Company may also be deferred. At retirement or termination, amounts deferred
will be paid out over 5, 10, 15, or 20 years. Amounts deferred receive interest
at 150 percent of the Moody's Composite Bond Rate.
The Company also provides a retirement plan for its outside directors. With
a minimum of 10 years of service, an outside director can retire and receive an
annual benefit for life equal to the annual retainer, at retirement, for serving
on the Company's Board. Directors who retire before age 65, after satisfying the
minimum service obligation, will receive retirement benefits upon reaching age
65. Upon a change in control of the Company, each of the directors of the
Company with at least eight years of service will be entitled to receive
retirement benefits.
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EXECUTIVE COMPENSATION
The following table provides compensation earned by the Company's Chief
Executive Officer and each of the four most highly compensated executive
officers of the Company, at year-end 1998, for the years ended December 31,
1998, 1997, and 1996.
SUMMARY COMPENSATION TABLE (1)
Company’s website, www.swgas.com.
Information with respect to unexercised options grantedexecutive compensation is set forth under the Option Plan to the named executive officersheading “Executive Compensation and held by them at
December 31, 1998.
AGGREGATED OPTION/SAR EXERCISES IN 1998 AND
YEAR-END OPTION/SAR VALUES
(a)Security Ownership of Certain Beneficial Owners. A group Information with respect to security ownership of investment
companies headedcertain beneficial owners is set forth under the heading “Securities Ownership by Mario J. Gabelli reportedDirectors, Director Nominees, Executive Officers, and Certain Beneficial Owners” in February 1999, that it owned
3,023,883 shares of the Common Stock (approximately 9.9 percent as of March 15,
1999). The Company has been advised that the investment companies hold the
shares as investment advisors for other beneficial owners.
definitive 2004 Proxy Statement, which by this reference is incorporated herein.
(b)Security Ownership of Management. The following table discloses all
Common Stock Information with respect to security ownership of management is set forth under the heading “Securities Ownership by Directors, Director Nominees, Executive Officers, and Certain Beneficial Owners” in the definitive 2004 Proxy Statement, which by this reference is incorporated herein.
(c)Changes in Control. None.
(d)Securities Authorized for Issuance Under Equity Compensation Plans.
At December 31, 2003, the Company had two stock-based compensation plans. With respect to the first plan, the Company may grant options to purchase shares of common stock to key employees and outside directors.
| Equity Compensation Plan Information | |||||||
Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance | ||||
(Thousands of shares) | |||||||
Equity compensation plans approved by security holders | 1,502 | $ | 21.83 | 1,016 | |||
Equity compensation plans not approved by security holders | — | — | — | ||||
Total | 1,502 | $ | 21.83 | 1,016 | |||
Pursuant to the terms of the management incentive plan, the Company beneficially owned bymay issue restricted stock in the directorsform of performance shares to encourage key employees to remain in its employment to achieve short-term and long-term performance goals.
Plan category | Number of securities to be issued upon vesting of performance shares | Weighted-average grant date fair value of award | Number of securities remaining available for future issuance | ||||
(Thousands of shares) | |||||||
Equity compensation plans approved by security holders | 381 | $ | 21.41 | — | |||
Equity compensation plans not approved by security holders | — | — | — | ||||
Total | 381 | $ | 21.41 | — | |||
Additional information regarding the executive officerstwo equity compensation plans is included in Note 9 of the Company, as of March 15, 1999.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information with respect to accounting fees and services associated with PricewaterhouseCoopers LLP is set forth under the heading “Selection of Independent Accountants” in the definitive 2004 Proxy Statement, which by this reference is incorporated herein.
PART IV
ITEM 14.
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report on Form 10-K:
(1) The Consolidated Financial Statements of the Company (including the
Report of Independent Public Accountants) required to be reported
herein are incorporated by reference to the information reported in
the 1998 Annual Report to Shareholders under the following
captions:
Report of Independent Public Accountants.....................39
Consolidated Balance Sheets..................................40
Consolidated Statements of Income............................41
Consolidated Statements of Cash Flows........................42
Consolidated Statements of Stockholders' Equity..............43
Notes to Consolidated Financial Statements...................44
(2) All schedules have been omitted because the required information is
either inapplicable or included in the Notes to Consolidated
Financial Statements.
(3) See List of exhibits.
| (1) | The Consolidated Financial Statements of the Company (including the Reports of Independent Auditors) required to be reported herein are incorporated by reference to the information reported in the 2003 Annual Report to Shareholders under the following captions: |
Consolidated Balance Sheets | 37 | |
Consolidated Statements of Income | 39 | |
Consolidated Statements of Cash Flows | 40 | |
Consolidated Statements of Stockholders’ Equity | 41 | |
Notes to Consolidated Financial Statements | 42 | |
Report of Independent Auditors | 62 | |
Report of Independent Public Accountants | 63 |
| (2) | All schedules have been omitted because the required information is either inapplicable or included in the Notes to Consolidated Financial Statements. |
| (3) | SeeLIST OF EXHIBITS. |
(b) Reports on Form 8-K.
The
On February 17, 2004, the Company filed a Form 8-K, dated February 10, 1999, reportingfurnished summary financial information for the quarter and year ended December 31, 1998.
2003 pursuant to Item 12 of Form 8-K.
(c) See List of exhibits.
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25
LIST OF EXHIBITS.
LIST OF EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
2.01(15) Agreement between Southwest Gas Corporation, The Southwest
Companies and PriMerit Bank, Federal Savings Bank, as sellers and
Norwest Corporation as buyer, dated April 10, 1996, regarding sale
of assets and liabilities of PriMerit Bank.
2.02(24) Agreement and Plan of Merger by and among ONEOK, Inc., Oasis
Acquisition Corporation, and Southwest Gas Corporation dated as of
December 14, 1998.
3(i)(20) Restated Articles of Incorporation, as amended.
3(ii) Amended Bylaws of Southwest Gas Corporation.
4.01(1) Indenture between the Company and Bank of America National Trust
and Savings Association, as successor by merger to Security Pacific
National Bank, as Trustee, dated August 1, 1986, with respect to 9%
Series A and Series B and 8 3/4% Series C Debentures.
4.02(6) Sixth Supplemental Indenture of the Company to Bank of America
National Trust and Savings Association, as successor by merger to
Security Pacific National Bank, as Trustee, dated as of June 16,
1992, supplementing and amending the Indenture dated as of August
1, 1986, with respect to 9 3/4% Debentures, Series F, due 2002.
4.03(7) Indenture between Clark County, Nevada, and Bank of America Nevada
as Trustee, dated September 1, 1992, with respect to the issuance
of $130,000,000 Industrial Development Revenue Bonds (Southwest Gas
Corporation), $30,000,000 1992 Series A, due 2027, and $100,000,000
1992 Series B, due 2032.
4.04(8) Indenture between Clark County, Nevada, and Harris Trust and
Savings Bank as Trustee, dated December 1, 1993, with respect to
the issuance of $75,000,000 Industrial Development Revenue Bonds
(Southwest Gas Corporation), 1993 Series A, due 2033.
4.05(8) Indenture between City of Big Bear Lake, California, and Harris
Trust and Savings Bank as Trustee, dated December 1, 1993, with
respect to the issuance of $50,000,000 Industrial Development
Revenue Bonds (Southwest Gas Corporation Project), 1993 Series A,
due 2028.
4.06(16) Indenture between the Company and Harris Trust and Savings Bank
dated July 15, 1996, with respect to Debt Securities.
4.07(17) First Supplemental Indenture of the Company to Harris Trust and
Savings Bank dated August 1, 1996, supplementing and amending the
Indenture dated as of July 15, 1996, with respect to 7 1/2% and 8%
Debentures, due 2006 and 2026, respectively.
4.08(19) Second Supplemental Indenture of the Company to Harris Trust and
Savings Bank dated December 30, 1996, supplementing and amending
the Indenture dated as of July 15, 1996, with respect to
Medium-Term Notes.
4.09(3) Certificate of Trust of Southwest Gas Capital I.
4.10(11) Amended and Restated Declaration of Trust of Southwest Gas
Capital I.
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26
4.11(11) Form of Preferred Security (attached as Annex I to Exhibit A to the
Amended and Restated Declaration of Trust of Southwest Gas Capital
I included as Exhibit 4.10 hereto).
4.12(4) Form of Guarantee with respect to Preferred Securities.
4.13(10) Southwest Gas Capital I Preferred Securities Guarantee by the
Company and Harris Trust and Savings Bank, dated as of October 31,
1995.
4.14(10) Form of Subordinated Debt Security (included in the First
Supplemental Indenture included as Exhibit 4.16 hereto).
4.15(10) Subordinated Debt Securities Indenture between the Company and
Harris Trust and Savings Bank, dated as of October 31, 1995.
4.16(10) First Supplemental Indenture between the Company and Harris Trust
and Savings Bank, dated as of October 31, 1995, supplementing and
amending the Indenture dated as of October 31, 1995, with respect
to the 9.125% Subordinated Debt Securities.
4.17(2) Form of Deposit Agreement.
4.18(2) Form of Depositary Receipt (attached as Exhibit A to Deposit
Agreement included as Exhibit 4.17 hereto).
4.19 Amended and Restated Rights Agreement between the Company and
Harris Trust Company, as Rights Agent, dated as of February 9,
1999.
4.20 The Company hereby agrees to furnish to the SEC, upon request, a
copy of any instruments defining the rights of holders of long-term
debt issued by Southwest Gas Corporation or its subsidiaries.
10.01(5) Participation Agreement among the Company and General Electric
Credit Corporation, Prudential Insurance Company of America, Aetna
Life Insurance Company, Merrill Lynch Interfunding, Bank of America
through purchase of Valley Bank of Nevada, Bankers Trust Company
and First Interstate Bank of Nevada, dated as of July 1, 1982.
10.02(18) Amended and Restated Lease Agreement between the Company and Spring
Mountain Road Associates, dated as of July 1, 1996.
10.03(8) Financing Agreement between the Company and Clark County, Nevada,
dated September 1, 1992.
10.04(8) Financing Agreement between the Company and Clark County, Nevada,
dated as of December 1, 1993.
10.05(8) Project Agreement between the Company and City of Big Bear Lake,
California, dated as of December 1, 1993.
10.06(9) Southwest Gas Corporation Executive Deferral Plan, amended and
restated as of May 10, 1994.
10.07(14) Southwest Gas Corporation Directors Deferral Plan, together with
first amendment dated March 5, 1996.
10.08(8) Southwest Gas Corporation Board of Directors Retirement Plan,
amended and restated as of October 1, 1993.
10.09(22) Southwest Gas Corporation Management Incentive Plan, amended and
restated January 1, 1995.
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27
10.10(9) Southwest Gas Corporation Supplemental Retirement Plan, amended and
restated as of May 10, 1994.
10.11(23) Form of Employment Agreement with Company Officers.
10.12(23) Form of Change in Control Agreement with Company Officers.
10.13(12) Merger Agreement among the Company and Northern Pipeline
Construction Co., dated as of November 13, 1995.
10.14(13) Southwest Gas Corporation 1996 Stock Incentive Plan.
10.15(21) $350 million Revolving Credit Agreement among the Company, Union
Bank of Switzerland, et al., dated as of June 12, 1997.
12.01 Computation of Ratios of Earnings to Fixed Charges and Ratios of
Earnings to Combined Fixed Charges and Preferred Stock Dividends of
the Company.
13.01 Portions of 1998 Annual Report incorporated by reference to the
Form 10-K.
21.01 List of subsidiaries of Southwest Gas Corporation.
23.01 Consent of Arthur Andersen LLP, Independent Public Accountants.
27.01 Financial Data Schedule (filed electronically only).
- -----------------
(1) Incorporated herein by reference to the Registration Statement on Form S-3,
No. 33-7931.
(2) Incorporated herein by reference to the Registration Statement on Form S-3,
No. 33-55621.
(3) Incorporated herein by reference to the Registration Statement on Form S-3,
No. 33-62143.
(4) Incorporated herein by reference to Amendment No. 1 to Registration
Statement on Form S-3, No. 33-62143.
(5) Incorporated herein by reference to the report on Form 10-K for the year
ended December 31, 1982.
(6) Incorporated herein by reference to the report on Form 10-Q for the quarter
ended June 30, 1992.
(7) Incorporated herein by reference to the report on Form 10-Q for the quarter
ended September 30, 1992.
(8) Incorporated herein by reference to the report on Form 10-K for the year
ended December 31, 1993.
(9) Incorporated herein by reference to the report on Form 10-Q for the quarter
ended June 30, 1994
(10) Incorporated herein by reference to the report on Form 10-Q for the quarter
ended September 30, 1995.
(11) Incorporated herein by reference to the report on Form 8-K dated October
26, 1995.
(12) Incorporated herein by reference to the report on Form 10-K for the year
ended December 31, 1995.
25
28
(13) Incorporated herein by reference to the Proxy Statement dated May 30, 1996.
(14) Incorporated herein by reference to the report on Form 10-Q for the quarter
ended June 30, 1996.
(15) Incorporated herein by reference to the report on Form 8-K dated July 19,
1996.
(16) Incorporated herein by reference to the report on Form 8-K dated July 26,
1996.
(17) Incorporated herein by reference to the report on Form 8-K dated July 31,
1996.
(18) Incorporated herein by reference to the report on Form 10-Q for the quarter
ended September 30, 1996.
(19) Incorporated herein by reference to the report on Form 8-K dated December
30, 1996.
(20) Incorporated herein by reference to the report on Form 10-Q for the quarter
ended March 31, 1997.
(21) Incorporated herein by reference to the report on Form 10-Q for the quarter
ended June 30, 1997.
(22) Incorporated herein by reference to the report on Form 10-K for the year
ended December 31, 1997.
(23) Incorporated herein by reference to the report on Form 10-Q for the quarter
ended September 30, 1998.
(24) Incorporated herein by reference to the report on Form 8-K dated December
14, 1998.
26
29
| Exhibit Number | Description of Document | |
| 3(i) | Restated Articles of Incorporation, as amended. Incorporated herein by reference to the report on Form 10-Q for the quarter ended March 31, 1997. | |
| 3(ii) | Amended Bylaws of Southwest Gas Corporation. Incorporated herein by reference to the report on Form 10-Q for the quarter ended September 30, 2003. | |
| 4.01 | Indenture between Clark County, Nevada, and Harris Trust and Savings Bank as Trustee, dated December 1, 1993, with respect to the issuance of $75,000,000 Industrial Development Revenue Bonds (Southwest Gas Corporation), 1993 Series A, due 2033. Incorporated herein by reference to the report on Form 10-K for the year ended December 31, 1993. | |
| 4.02 | Indenture between City of Big Bear Lake, California, and Harris Trust and Savings Bank as Trustee, dated December 1, 1993, with respect to the issuance of $50,000,000 Industrial Development Revenue Bonds (Southwest Gas Corporation Project), 1993 Series A, due 2028. Incorporated herein by reference to the report on Form 10-K for the year ended December 31, 1993. | |
| 4.03 | Form of Deposit Agreement. Incorporated herein by reference to the Registration Statement on Form S-3, No. 33-55621. | |
| 4.04 | Form of Depositary Receipt (attached as Exhibit A to Deposit Agreement included as Exhibit 4.03 hereto). Incorporated herein by reference to the Registration Statement on Form S-3, No. 33-55621. | |
| 4.05 | Indenture between the Company and Harris Trust and Savings Bank dated July 15, 1996, with respect to Debt Securities. Incorporated herein by reference to the report on Form 8-K dated July 26, 1996. | |
| 4.06 | First Supplemental Indenture of the Company to Harris Trust and Savings Bank dated August 1, 1996, supplementing and amending the Indenture dated as of July 15, 1996, with respect to 7 1/2% and 8% Debentures, due 2006 and 2026, respectively. Incorporated herein by reference to the report on Form 8-K dated July 31, 1996. | |
| 4.07 | Second Supplemental Indenture of the Company to Harris Trust and Savings Bank dated December 30, 1996, supplementing and amending the Indenture dated as of July 15, 1996, with respect to Medium-Term Notes. Incorporated herein by reference to the report on Form 8-K dated December 30, 1996. | |
| 4.08 | Indenture between Clark County, Nevada, and Harris Trust and Savings Bank as Trustee, dated as of October 1, 1999, with respect to the issuance of $35,000,000 Industrial Development Revenue Bonds (Southwest Gas Corporation), Series 1999A and Taxable Series 1999B or convertibles of Series B (Series C and D), due 2038. Incorporated herein by reference to the report on Form 10-K for the year ended December 31, 1999. | |
| 4.09 | Third Supplemental Indenture between the Company and The Bank of New York, dated as of February 13, 2001, supplementing and amending the Indenture dated as of July 15, 1996, with respect to the $200,000,000, 8.375% Notes, due 2011. Incorporated herein by reference to the report on Form 8-K dated February 8, 2001. | |
| 4.10 | Fourth Supplemental Indenture of the Company to The Bank of New York as successor to Harris Trust and Savings Bank dated as of May 6, 2002, supplementing and amending the Indenture dated as of | |
| July 15, 1996, with respect to the 7.625% Senior Unsecured Notes due 2012. Incorporated herein by reference to the report on Form 8-K dated May 1, 2002. | ||
| 4.11 | Certificate of Trust of Southwest Gas Capital II. Incorporated herein by reference to the Registration Statement on Form S-3, No. 333-106419. | |
| 4.12 | Certificate of Trust of Southwest Gas Capital III. Incorporated herein by reference to the Registration Statement on Form S-3, No. 333-106419. | |
| 4.13 | Certificate of Trust of Southwest Gas Capital IV. Incorporated herein by reference to the Registration Statement on Form S-3, No. 333-106419. | |
| 4.14 | Trust Agreement of Southwest Gas Capital III. Incorporated herein by reference to the Registration Statement on Form S-3, No. 333-106419. | |
| 4.15 | Trust Agreement of Southwest Gas Capital IV. Incorporated herein by reference to the Registration Statement on Form S-3, No. 333-106419. | |
| 4.16 | Form of Common Stock certificate. Incorporated herein by reference to the report on Form 8-K dated July 22, 2003. | |
| 4.17 | Form of Preferred Trust Security. Incorporated herein by reference to the report on Form 8-K dated August 20, 2003. | |
| 4.18 | Form of Indenture with respect to the 7.70% Junior Subordinated Debentures. Incorporated herein by reference to the report on Form 8-K dated August 20, 2003. | |
| 4.19 | Form of 7.70% Junior Subordinated Debenture. Incorporated herein by reference to the report on Form 8-K dated August 20, 2003. | |
| 4.20 | Form of Amended and Restated Trust Agreement of Southwest Gas Capital II. Incorporated herein by reference to the report on Form 8-K dated August 20, 2003. | |
| 4.21 | Form of Guarantee Agreement with respect to the Preferred Trust Securities. Incorporated herein by reference to the report on Form 8-K dated August 20, 2003. | |
| 4.22 | The Company hereby agrees to furnish to the SEC, upon request, a copy of any instruments defining the rights of holders of long-term debt issued by Southwest Gas Corporation or its subsidiaries; the total amount of securities authorized thereunder does not exceed 10 percent of the consolidated total assets of Southwest Gas Corporation and its subsidiaries. | |
| 10.01 | Participation Agreement among the Company and General Electric Credit Corporation, Prudential Insurance Company of America, Aetna Life Insurance Company, Merrill Lynch Interfunding, Bank of America through purchase of Valley Bank of Nevada, Bankers Trust Company and First Interstate Bank of Nevada, dated as of July 1, 1982. Incorporated herein by reference to the report on Form 10-K for the year ended December 31, 1982. | |
| 10.02 | Financing Agreement between the Company and Clark County, Nevada, dated as of December 1, 1993. Incorporated herein by reference to the report on Form 10-K for the year ended December 31, 1993. | |
| 10.03 | Project Agreement between the Company and City of Big Bear Lake, California, dated as of December 1, 1993. Incorporated herein by reference to the report on Form 10-K for the year ended December 31, 1993. | |
| 10.04 | Amended and Restated Lease Agreement between the Company and Spring Mountain Road Associates, dated as of July 1, 1996. Incorporated herein by reference to the report on Form 10-Q for the quarter ended September 30, 1996. | ||
| 10.05 | * | Southwest Gas Corporation Supplemental Retirement Plan, amended and restated as of March 1, 1999. Incorporated herein by reference to the report on Form 10-K for the year ended December 31, 1999. | |
| 10.06 | * | Southwest Gas Corporation Board of Directors Retirement Plan, amended and restated as of March 1, 1999. Incorporated herein by reference to the report on Form 10-K for the year ended December 31, 1999. | |
| 10.07 | Financing Agreement between the Company and Clark County, Nevada, dated as of October 1, 1999. Incorporated herein by reference to the report on Form 10-K for the year ended December 31, 1999. | ||
| 10.08 | * | Amended Form of Employment Agreement with Company Officers. Incorporated herein by reference to the reports on Form 10-Q for the quarters ended September 30, 1998, September 30, 2000 and September 30, 2001. | |
| 10.09 | * | Amended Form of Change in Control Agreement with Company Officers. Incorporated herein by reference to the reports on Form 10-Q for the quarters ended September 30, 1998, September 30, 2000 and September 30, 2001. | |
| 10.10 | * | Southwest Gas Corporation Management Incentive Plan, amended and restated January 1, 2002. Incorporated herein by reference to the Proxy Statement dated April 2, 2002. | |
| 10.11 | * | Southwest Gas Corporation 2002 Stock Incentive Plan. Incorporated herein by reference to the Proxy Statement dated April 2, 2002. | |
| 10.12 | Multi-Year Revolving Credit Agreement among the Company, The Bank of New York, et al., dated as of May 10, 2002. Incorporated herein by reference to the report on Form 10-Q for the quarter ended September 30, 2002. | ||
| 10.13 | * | Southwest Gas Corporation Executive Deferral Plan, amended and restated as of November 19, 2002. Incorporated herein by reference to the Report on Form 10-K for the year ended December 31, 2002. | |
| 10.14 | * | Southwest Gas Corporation Directors Deferral Plan, amended and restated as of November 19, 2002. Incorporated herein by reference to the Report on Form 10-K for the year ended December 31, 2002. | |
| 10.15 | Lease Supplement (attached as a supplement to Exhibit 10.01) as of December 12, 2002. Incorporated herein by reference to the Report on Form 10-K for the year ended December 31, 2002. | ||
| 10.16 | Financing agreement dated as of March 1, 2003 by and between Clark County, Nevada and Southwest Gas Corporation relating to Clark County, Nevada Industrial Development Revenue Bonds Series 2003A, Series 2003B, Series 2003C, Series 2003D and Series 2003E. Incorporated herein by reference to the report on Form 10-Q for the quarter ended September 30, 2003. | ||
| 12.01 | Computation of Ratios of Earnings to Fixed Charges of Southwest Gas Corporation. | ||
| 13.01 | Portions of 2003 Annual Report incorporated by reference to the Form 10-K. | ||
| 16.01 | Letter of Arthur Andersen LLP regarding change in certifying accountant. Incorporated herein by reference to the report on Form 8-K dated May 28, 2002. | |
| 21.01 | List of subsidiaries of Southwest Gas Corporation. | |
| 23.01 | Consent of PricewaterhouseCoopers LLP, Independent Accountants. | |
| 31.01 | Section 302 Certifications. | |
| 32.01 | Section 906 Certifications. | |
| * | Compensation Plans |
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SOUTHWEST GAS CORPORATION
Date: March 25, 1999 By /s/ MICHAEL O. MAFFIE
----------------------------
Michael O. Maffie,
President and Chief
Executive Officer
| SOUTHWEST GAS CORPORATION | ||||
| Date: March 11, 2004 | By | /s/ MICHAEL O. MAFFIE | ||
Michael O. Maffie Chief Executive Officer | ||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature | Title | Date | ||
/s/ GEORGE C. (George C. Biehl) | Director, Executive Vice President, | March 11, 2004 | ||
/s/ MANUEL J. CORTEZ (Manuel J. Cortez) | Director | March 11, 2004 | ||
/s/ MARK M. FELDMAN (Mark M. Feldman) | Director | March 11, 2004 | ||
/s/ DAVID H. GUNNING (David H. Gunning) | Director | March 11, 2004 | ||
/s/ THOMAS Y. HARTLEY (Thomas Y. Hartley) | Chairman of the Board of Directors | March 11, 2004 | ||
/s/ LEROY C. (LeRoy C. Hanneman, Jr.) | Director | March 11, 2004 | ||
/s/ MICHAEL B. JAGER (Michael B. Jager) | Director | March 11, 2004 | ||
/s/ LEONARD R. JUDD (Leonard R. Judd) | Director | March 11, 2004 | ||
/s/ JAMES J. KROPID (James J. Kropid) | Director | March 11, 2004 | ||
/s/ MICHAEL O. MAFFIE (Michael O. Maffie) | Director and Chief Executive Officer | March 11, 2004 | ||
/s/ CAROLYN M. SPARKS (Carolyn M. Sparks) | Director | March 11, 2004 | ||
/s/ TERRENCE L. WRIGHT (Terrence L. Wright) | Director | March 11, 2004 | ||
/s/ ROY R. CENTRELLA Roy R. Centrella | Vice President, Controller, and | |||
| March |
EXHIBIT INDEX
Exhibit Number | Description of | |
| 12.01 | Computation of | |
| 13.01 | Portions of 2003 Annual Report to Shareholders incorporated by reference to Form 10-K. | |
| 21.01 | List of Subsidiaries of Southwest Gas Corporation. | |
| 23.01 | Consent of PricewaterhouseCoopers LLP, Independent Accountants. | |
| 31.01 | Section 302 Certifications. | |
| 32.01 | Section 906 Certifications. | |