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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 31, 1996
COMMISSION FILE NUMBER 1-7850
SOUTHWEST GAS CORPORATION
(EXACT NAME OF REGISTRANT 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: (702) 876-7237
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
Common Stock, $1 par value New York Stock Exchange, Inc.
Pacific Stock Exchange, Inc.
9.125% Trust Originated Preferred Securities New York Stock Exchange, Inc.
Pacific Stock Exchange, Inc.
Stock Purchase Rights New York Stock Exchange, Inc.
Pacific 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 X 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'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. [X]
AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY
NONAFFILIATES OF THE REGISTRANT:
$504,395,738 at March 14, 1997
THE NUMBER OF SHARES OUTSTANDING OF COMMON STOCK:
Common Stock, $1 Par Value, 26,901,106 shares as of March 14, 1997
DOCUMENTS INCORPORATED BY REFERENCE
DESCRIPTION PART INTO WHICH INCORPORATED
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Annual Report to Shareholders for the Year Ended December 31, 1996 Parts I, II and IV
Proxy Statement dated March 31, 1997 Part III
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TABLE OF CONTENTS
PART I
PAGE
----
ITEM 1. BUSINESS..................................................................... 1
Natural Gas Operations....................................................... 1
General Description........................................................ 1
Rates and Regulation....................................................... 2
Competition................................................................ 3
Demand for Natural Gas..................................................... 3
Natural Gas Supply......................................................... 4
Environmental Matters...................................................... 4
Employees.................................................................. 5
Construction Services........................................................ 5
ITEM 2. PROPERTIES................................................................... 5
ITEM 3. LEGAL PROCEEDINGS............................................................ 8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......................... 8
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.... 8
ITEM 6. SELECTED FINANCIAL DATA...................................................... 8
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS................................................................... 8
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.................................. 8
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE................................................................... 8
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT........................... 8
ITEM 11. EXECUTIVE COMPENSATION....................................................... 9
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............... 9
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................... 10
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K............. 10
List of Exhibits............................................................. 11
SIGNATURES............................................................................. 15
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PART I
ITEM 1. BUSINESS
The registrant, Southwest Gas Corporation (the Company), is incorporated
under the laws of the State 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.
The Company is principally 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 or the natural gas operations segment).
In April 1996, the Company acquired all of the outstanding stock of
Northern Pipeline Construction Co. (Northern or the 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 construction services segment provides
utility companies with trenching and installation, replacement, and maintenance
services for energy distribution systems.
In January 1996, the Company entered into a definitive agreement with
Norwest Corporation (Norwest) to sell PriMerit Bank, Federal Savings Bank
(PriMerit), a wholly owned subsidiary, to Norwest for $175 million. In April
1996, Norwest elected, pursuant to an option in the original agreement, to
structure the acquisition as a purchase of substantially all of the assets and
liabilities of PriMerit in exchange for consideration of $191 million. The
Company paid an additional $16 million in income taxes by virtue of consummating
the sale as a purchase of assets and assumption of liabilities. The
consideration of $191 million, therefore, provided the economic equivalent to
the Company of a sale of stock of PriMerit for $175 million. The sale closed in
July 1996, following receipt of shareholder and various governmental approvals
and satisfaction of other customary closing conditions. Net proceeds of
approximately $163 million were initially used to pay down short-term debt and a
portion of term-loan facilities. Debt incurred in connection with its investment
in PriMerit was retired in August 1996. For consolidated financial reporting
purposes, the financial services activities are disclosed as discontinued
operations.
Financial information with respect to the Company's industry segments is
included in Note 12 of the Notes to Consolidated Financial Statements which is
included in the Annual Report to Shareholders and is incorporated herein by
reference.
NATURAL GAS OPERATIONS
GENERAL DESCRIPTION
Southwest is subject to regulation by the Arizona Corporation Commission
(ACC), the Public Service Commission of Nevada (PSCN), and the California Public
Utilities Commission (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 of the Company's accounting
practices, transmission facilities, and rates are subject to regulation by the
Federal Energy Regulatory Commission (FERC).
Southwest purchases, transports, and distributes natural gas to
approximately 1,092,000 residential, commercial, and industrial customers in
geographically diverse portions of Arizona, Nevada, and California. There were
63,000 customers added to the system during 1996.
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The table below lists Southwest's percentage of operating margin (operating
revenues less net cost of gas) by major customer class for the years indicated:
ELECTRIC
GENERATION,
RESIDENTIAL AND LARGE COMMERCIAL, RESALE, AND
FOR THE YEAR ENDED SMALL COMMERCIAL INDUSTRIAL AND OTHER TRANSPORTATION
------------------ ---------------- -------------------- --------------
December 31, 1996................ 80% 6% 14%
December 31, 1995................ 79 7 14
December 31, 1994................ 79 7 14
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 Southwest's system
accounted for 54 percent of total system throughput in 1996. Although the
volumes were significant, these customers provide a much smaller proportionate
share of operating margin. In 1996, customers who utilized this service
transported 968 million therms, contributing 11 percent of operating margin.
The demand for natural gas is seasonal. Variability in weather from normal
temperatures may materially impact results of operations. It is management's
opinion that comparisons of earnings for interim periods do not reliably reflect
overall trends and changes in Southwest's 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, and PSCN 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) storage facilities of Paiute
Pipeline Company (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). The LDCs transporting on Paiute's system are:
Sierra Pacific Power Company (serving Reno and Sparks, Nevada), WP Natural Gas
(serving South Lake Tahoe, California), and Southwest Gas Corporation (serving
North Lake Tahoe, California and various locations throughout northern Nevada).
Rates charged to customers vary according to customer class and are set at
levels allowing 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. Southwest's 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 plant in service, net deferred income tax liabilities,
and certain other deductions. Rate schedules in all of Southwest's service areas
contain purchased gas adjustment (PGA) clauses which allow Southwest to file for
rate adjustments as the cost of purchased gas changes. Generally, Southwest
tariffs provide for annual adjustment dates for changes in purchased gas costs.
However, Southwest may request to adjust its rates more often than once each
year, if conditions warrant. These changes have no direct impact on profit
margin.
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The table below lists the docketed general rate filings initiated and/or
completed within each ratemaking area in 1996:
MONTH
FINAL RATES
RATEMAKING AREA TYPE OF FILING MONTH FILED EFFECTIVE
------------------------------- ---------------------- -------------- -------------
Arizona:
Central and Southern General rate case November 1996 --
California:
Northern Operational Attrition November 1996 January 1997
Nevada:
Northern and Southern General rate case December 1995 July 1996
FERC:
Paiute General rate case July 1996 (1)
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(1) Interim rates reflecting the increased revenues became effective in January
1997. The rates are subject to refund until a final order is issued.
COMPETITION
Electric utilities are Southwest's principal competitors 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. Southwest has been successful in retaining
these customers by setting rates at levels competitive with alternative energy
sources such as fuel oils and coal. As a result, 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 large end-users. End-use customers located in close proximity
to these interstate pipelines pose a potential bypass threat and, therefore,
require Southwest to closely monitor each customer's situation and provide
competitive service in order to retain the customer.
Southwest has maintained an intensive effort to mitigate bypass risks
through the use of discounted transportation contract rates, special long-term
contracts with electric generation and cogeneration customers, and new tariff
programs. One such program provides an opportunity for potential bypass
customers in Arizona and all transportation customers in Nevada to purchase
natural gas-related services as a bundled package, including the procurement of
gas supply. Southwest enters into gas 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
Southwest's other competitive response initiatives and otherwise competitive
rates, has helped mitigate the financial impact from the threat of bypass.
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.
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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.
Southwest has entered the residential cooling market by working with the
manufacturers of gas air conditioning units and the builders of new residential
units in the Arizona and southern Nevada service areas. Gas air conditioning
represents an emerging market with the long-term potential for Southwest to
smooth its currently seasonal earnings.
Natural gas vehicles (NGVs) represent another nontraditional source of
demand for natural gas. Southwest encourages the use of NGVs throughout its
service territories. As of December 31, 1996, there were 38 public- and
nonpublic-access fueling stations and approximately 3,900 NGVs in use throughout
Southwest's 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 believes that natural gas supplies and pipeline capacity will
remain plentiful and readily available. Gas supplies for Southwest's southern
system (the Arizona, southern Nevada and southern California properties) are
primarily obtained from producing regions in New Mexico (San Juan basin), Texas
(Permian basin), and Rocky Mountain areas. For its northern system (the 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 (SoCal). 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's primary objective 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. Balancing firm supply assurances against the
associated costs dictate a continually changing natural gas purchasing mix
within the supply portfolio. Southwest believes its balanced portfolio provides
security as well as the operating flexibility needed to meet changing market
conditions. During 1996, Southwest acquired gas supplies from over 70 suppliers.
In managing its gas supply portfolio, Southwest does not utilize derivative
financial instruments.
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.
The purchase of natural gas at the wellhead is not regulated. Natural gas
prices have 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 witnessed particularly steep price increases. See additional
discussion regarding the effect of changing natural gas prices included in the
Capital Resources & Liquidity section of Management's Discussion and Analysis,
which is included in the Annual Report to Shareholders.
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 environmen-
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tally safe fuels currently available, its use helps energy users to comply with
stricter environmental standards. For example, legislation, such as the Clean
Air Act Amendments of 1990 and the Energy Policy Act of 1992, has a positive
effect on natural gas demand, including provisions encouraging the use of
natural gas vehicles, cogeneration, and independent power production.
EMPLOYEES
At December 31, 1996, the natural gas operations segment had 2,424 regular
full-time equivalent employees. Southwest believes it has a good relationship
with its employees. No employees are represented by a union.
Reference is hereby made to Item 10 in Part III of this report on Form 10-K
for information relative to the executive officers of the Company.
CONSTRUCTION SERVICES
Northern Pipeline Construction Co. (Northern or the construction services
segment) is a full-service underground piping contractor which provides utility
companies with trenching and installation, replacement, and maintenance of
energy distribution systems. Northern contracts primarily with LDCs to install,
repair, and maintain energy distribution systems from the town border station to
the end-user's meter. 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 with work generally scheduled for the spring
through fall months in colder climate areas, such as the Midwest. In warmer
climate areas, such as the southwestern United States, construction occurs year
round.
Northern's business activities are often concentrated in utility service
territories where existing gas lines are scheduled for replacement. An LDC will
typically contract with Northern to provide pipe replacement services and new
line installations. Contract terms generally specify unit price or fixed-price
arrangements. Unit price contracts establish prices for all of the various
services to be performed during the contract period. These contracts often have
annual pricing reviews. During 1996, more than 90 percent of revenue was earned
under unit price contracts. As of December 31, 1996 no backlog exists with
respect to outstanding construction contracts.
Competition within the industry is limited to several regional competitors
in what can be characterized as a largely fragmented industry. Northern
currently operates in approximately 20 major markets nationwide. Its customers
are the primary LDCs in those markets. Construction companies typically depend
on a few customers for their business. During 1996, Southwest accounted for 37
percent of Northern's 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, 1996, Northern
had 1,289 regular full-time equivalent employees. Employment peaked in October
1996 when there were 1,802 employees. The majority of the employees are
represented by collective bargaining agreements which is typical of the
construction industry.
Operations are conducted from 22 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. Field location
facilities consist of a small building for repairs and acreage to store
equipment.
Northern has acquired and professionally maintained state-of-the-art work
equipment required to ensure high quality performance and maximum efficiency.
Innovative technology is utilized to continuously improve productivity,
efficiency, and customer satisfaction. Northern has a strict policy for
maintaining its equipment and also adheres to a replacement program for the
majority of key equipment in order to minimize downtime and preserve resale
values.
ITEM 2. PROPERTIES
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
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land, buildings, furnishings, work equipment, and vehicles in plant investment.
Southwest's northern Nevada and northern California properties 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 its northern Nevada system and a
portion of the corporate headquarters office complex located in Las Vegas,
Nevada. Total gas plant, exclusive of leased property, at December 31, 1996, was
$1.7 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 of Southwest's gas main and service lines 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 Southwest's
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 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.
Southwest operates two major 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 map below shows the locations of Southwest's major facilities and major
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 Southwest's systems.
[MAP]
[DESCRIPTION: Map of Arizona, Nevada, and southern California indicating
the location of the Company's 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, Winnemuca, 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. 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 Paiute Pipeline Company's transmission pipeline (extending from
the Idaho/Nevada border to the Reno/Tahoe area) and the Company's pipeline
(extending from Laughlin/Bullhead City to the Las Vegas valley) are indicated.
The LNG facility is located near Lovelock, Nevada. The liquefied petroleum gas
facility is located near Reno, Nevada.]
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The information appearing in Part I, Item 1, page 5 with respect to the
construction services segment is incorporated herein by reference.
ITEM 3. LEGAL PROCEEDINGS
The Company has been named as defendant in various legal proceedings. The
ultimate dispositions of these proceedings are not presently determinable;
however, it is the opinion of management that no litigation to which the Company
is subject will have a material adverse impact on its financial position or
results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
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 14,
1997, there were 26,967 holders of record of common stock. The market price of
the common stock was $18.75 as of March 14, 1997. The quarterly market price of
and dividends on the Company's common stock required by this item are included
in the 1996 Annual Report to Shareholders and are incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA
Information required by this item is included in the 1996 Annual Report to
Shareholders and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Information required by this item is included in the 1996 Annual Report to
Shareholders and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of Southwest Gas Corporation and
Notes thereto, together with the report of Arthur Andersen LLP, Independent
Public Accountants, are included in the 1996 Annual Report to Shareholders and
are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Identification of Directors. Information with respect to Directors is
set forth under the heading "Election of Directors" in the Company's definitive
Proxy Statement dated March 31, 1997, which by this reference is incorporated
herein.
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(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:
PERIOD
POSITION
NAME AGE POSITION HELD
---- --- -------- --------
Michael O. Maffie 49 President and Chief Executive Officer 1993-Present
President and Chief Operating Officer 1992-1993
George C. Biehl 49 Senior Vice President/Chief Financial Officer and 1996-Present
Corporate Secretary
Senior Vice President and Chief Financial Officer 1992-1996
James P. Kane 50 Senior Vice President/Operations 1997-Present
Vice President/Southern Arizona Division 1993-1997
Director/Operations Support 1992-1993
James F. Lowman 50 Senior Vice President/Central Arizona Division 1992-Present
Dudley J. Sondeno 44 Senior Vice President/Chief Knowledge and 1993-Present
Technology Officer
Vice President/Engineering and Operations Support 1992-1993
Edward S. Zub 48 Senior Vice President/Regulation and Product 1996-Present
Pricing
Vice President/Rates & Regulation 1992-1996
(c) Identification of Certain Significant Employees. None.
(d) Family Relationships. None of the Company's Directors or Executive
Officers are related to any other either by blood, marriage or adoption.
(e) Business Experience. Information with respect to Directors is described
in (a) above. 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.
Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a) of
the Securities Exchange Act of 1934 requires the Company's officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (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.
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, which includes assisting in the preparation of forms for filing. For 1996,
all the required reports were filed timely.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to executive compensation is set forth under the
heading "Executive Compensation and Benefits" in the Company's definitive Proxy
Statement dated March 31, 1997, which by this reference is incorporated herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners. None.
(b) Security Ownership of Management. Information with respect to security
ownership of management is set forth under the heading "Securities Ownership by
Nominees and Executive Officers" in the Company's definitive Proxy Statement
dated March 31, 1997, which by this reference is incorporated herein.
(c) Changes in Control. None.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to certain relationships and related transactions
is set forth under the heading "Certain Relationships and Related Transactions"
in the Company's definitive Proxy Statement dated March 31, 1997, which by this
reference is incorporated herein.
PART IV
ITEM 14. 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 Company's 1996 Annual Report under the following captions:
Consolidated Balance Sheets............................................. 36
Consolidated Statements of Income....................................... 37
Consolidated Statements of Cash Flows................................... 38
Consolidated Statements of Stockholders' Equity......................... 39
Notes to Consolidated Financial Statements.............................. 40
Report of Independent Public Accountants................................ 61
(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.
(b) Reports on Form 8-K.
The Company filed a Form 8-K, dated November 4, 1996, filing a consent of
Arthur Andersen LLP, independent public accountants in connection with the
filing of a Form S-3 registration statement.
The Company filed a Form 8-K, dated December 23, 1996, filing the ratio of
earnings to fixed charges for the twelve months ended September 30, 1996.
The Company filed a Form 8-K, dated December 30, 1996, filing documents in
connection with the Company's Medium-Term Notes.
The Company filed a Form 8-K, dated February 11, 1997, reporting summary
financial information for the year ended December 31, 1996.
(c) See List of exhibits.
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LIST OF EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
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2.01(17) 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.
3(i)(5) Restated Articles of Incorporation, as amended.
3(ii)(10) 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 the Company's 9% Series A and
Series B and 8 3/4% Series C Debentures.
4.02(7) First 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 October 1, 1986, supplementing and amending the
Indenture dated as of August 1, 1986, with respect to the Company's 9%
Debentures, Series A, due 2011.
4.03(7) Second 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 November 1, 1986, supplementing and amending the
Indenture dated as of August 1, 1986, with respect to the Company's 9%
Debentures, Series B, due 2011.
4.04(8) Third 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 December 1, 1986, supplementing and amending the
Indenture dated as of August 1, 1986, with respect to the Company's 8 3/4%
Debentures, Series C, due 2011.
4.05(8) Fourth 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 February 1, 1987, supplementing and amending the
Indenture dated as of August 1, 1986, with respect to the Company's 10%
Debentures, Series D, due 2017.
4.06(9) Fifth 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 August 1, 1988, supplementing and amending the
Indenture dated as of August 1, 1986, with respect to the Company's 9 3/8%
Debentures, Series E, due 2013.
4.07(10) 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 the Company's 9 3/4%
Debentures, Series F, due 2002.
4.08(11) 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 and $100,000,000 1992 Series B.
4.09(12) 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.
4.10(12) 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.
4.11(22) Indenture between the Company and Harris Trust and Savings Bank dated July 15,
1996, with respect to the Company's Debt Securities.
11
14
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
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4.12(23) First Supplement 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 the Company's 7 1/2% and 8% Debentures, due 2006 and
2026, respectively.
4.13(25) 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 the Company's Medium-Term Notes.
4.14(3) Certificate of Trust of Southwest Gas Capital I.
4.15(16) Amended and Restated Declaration of Trust of Southwest Gas Capital I.
4.16(16) 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
4.15 hereto).
4.17(4) Form of Guarantee with respect to Preferred Securities.
4.18(15) Southwest Gas Capital I Preferred Securities Guarantee by the Company and
Harris Trust and Savings Bank, dated as of October 31, 1995.
4.19(15) Form of Subordinated Debt Security (included in the First Supplemental
Indenture included as Exhibit 4.20 hereto).
4.20(15) Subordinated Debt Securities Indenture between the Company and Harris Trust and
Savings Bank, dated as of October 31, 1995.
4.21(15) 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.
4.22(2) Form of Deposit Agreement.
4.23(2) Form of Depositary Receipt (attached as Exhibit A to Deposit Agreement included
as Exhibit 4.22 hereto).
4.24(18) Rights Agreement between the Company and Harris Trust Company, as Rights Agent,
dated as of March 5, 1996.
4.25 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.
9.01 Not applicable.
10.01(6) 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(24) Amended and Restated Lease Agreement between the Company and Spring Mountain
Road Associates, dated as of July 1, 1996.
10.03(12) Financing Agreement between the Company and Clark County, Nevada, dated
September 1, 1992.
10.04(12) Financing Agreement between the Company and Clark County, Nevada, dated as of
December 1, 1993.
10.05(12) Project Agreement between the Company and City of Big Bear Lake, California,
dated as of December 1, 1993.
10.06(13) Southwest Gas Corporation Executive Deferral Plan, amended and restated May 10,
1994.
10.07(20) Southwest Gas Corporation Directors Deferral Plan, together with first
amendment dated March 5, 1996.
12
15
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
10.08(12) Southwest Gas Corporation Board of Directors Retirement Plan, amended and
restated effective October 1, 1993.
10.09(13) Southwest Gas Corporation Management Incentive Plan, amended and restated May
10, 1994.
10.10(13) Southwest Gas Corporation Supplemental Retirement Plan, amended and restated as
of May 10, 1994.
10.11 Form of Employment Agreement with Company officers.
10.12(14) $200 million Credit Agreement between the Company, Union Bank of Switzerland,
et al., dated as of January 27, 1995.
10.13(17) Merger Agreement among the Company and Northern Pipeline Construction Co.,
dated as of November 13, 1995.
10.14(19) Southwest Gas Corporation 1996 Stock Incentive Plan.
11.01 Not applicable.
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 1996 Annual Report incorporated by reference to the Form 10-K.
16.01 Not applicable.
18.01 Not applicable.
21.01 List of subsidiaries of Southwest Gas Corporation.
22.01 Not applicable.
23.01 Consent of Arthur Andersen LLP, Independent Public Accountants.
24.01 Not applicable.
27.01 Financial Data Schedule (filed electronically only).
28.01 Not applicable.
- ---------------
(1) Incorporated herein by reference to the Company's Registration Statement on
Form S-3, No. 33-7931.
(2) Incorporated herein by reference to the Company's Registration Statement on
Form S-3, No. 33-55621.
(3) Incorporated herein by reference to the Company's Registration Statement on
Form S-3, No. 33-62143.
(4) Incorporated herein by reference to the Company's Amendment No. 1 to
Registration Statement on Form S-3, No. 33-62143.
(5) Incorporated herein by reference to the Company's Registration Statement on
Form S-3, No. 333-14605.
(6) Incorporated herein by reference to the Company's report on Form 10-K for
the year ended December 31, 1982.
(7) Incorporated herein by reference to the Company's report on Form 10-K for
the year ended December 31, 1986.
(8) Incorporated herein by reference to the Company's report on Form 10-Q for
the quarter ended March 31, 1987.
(9) Incorporated herein by reference to the Company's report on Form 8-K dated
August 23, 1988.
(10) Incorporated herein by reference to the Company's report on Form 10-Q for
the quarter ended June 30, 1992.
(11) Incorporated herein by reference to the Company's report on Form 10-Q for
the quarter ended September 30, 1992.
(12) Incorporated herein by reference to the Company's report on Form 10-K for
the year ended December 31, 1993.
13
16
(13) Incorporated herein by reference to the Company's report on Form 10-Q for
the quarter ended June 30, 1994.
(14) Incorporated herein by reference to the Company's report on Form 10-K for
the year ended December 31, 1994.
(15) Incorporated herein by reference to the Company's report on Form 10-Q for
the quarter ended September 30, 1995.
(16) Incorporated herein by reference to the Company's report on Form 8-K dated
October 26, 1995.
(17) Incorporated herein by reference to the Company's report on Form 10-K for
the year ended December 31, 1995.
(18) Incorporated herein by reference to the Company's report on Form 8-K dated
March 5, 1996.
(19) Incorporated herein by reference to the Company's Proxy Statement dated May
30, 1996.
(20) Incorporated herein by reference to the Company's report on Form 10-Q for
the quarter ended June 30, 1996.
(21) Incorporated herein by reference to the Company's report on Form 8-K dated
July 19, 1996.
(22) Incorporated herein by reference to the Company's report on Form 8-K dated
July 26, 1996.
(23) Incorporated herein by reference to the Company's report on Form 8-K dated
July 31, 1996.
(24) Incorporated herein by reference to the Company's report on Form 10-Q for
the quarter ended September 30, 1996.
(25) Incorporated herein by reference to the Company's report on Form 8-K dated
December 30, 1996.
14
17
SIGNATURES
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 26, 1997 By /s/ MICHAEL O. MAFFIE
------------------------------------
Michael O. Maffie,
President and Chief Executive
Officer
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. BIEHL Senior Vice President, March 26, 1997
- --------------------------------------------- Chief Financial Officer and
(George C. Biehl) Corporate Secretary
/s/ EDWARD A. JANOV Vice President, Controller and March 26, 1997
- --------------------------------------------- Chief Accounting Officer
(Edward A. Janov)
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ RALPH C. BATASTINI Director March 26, 1997
- ---------------------------------------------
(Ralph C. Batastini)
/s/ MANUEL J. CORTEZ Director March 26, 1997
- ---------------------------------------------
(Manuel J. Cortez)
/s/ LLOYD T. DYER Director March 26, 1997
- ---------------------------------------------
(Lloyd T. Dyer)
/s/ KENNY C. GUINN Chairman of the Board of March 26, 1997
- --------------------------------------------- Directors
(Kenny C. Guinn)
/s/ THOMAS Y. HARTLEY Director March 26, 1997
- ---------------------------------------------
(Thomas Y. Hartley)
/s/ MICHAEL B. JAGER Director March 26, 1997
- ---------------------------------------------
(Michael B. Jager)
/s/ LEONARD R. JUDD Director March 26, 1997
- ---------------------------------------------
(Leonard R. Judd)
/s/ JAMES R. LINCICOME Director March 26,1997
- ---------------------------------------------
(James R. Lincicome)
/s/ MICHAEL O. MAFFIE Director, President and Chief March 26, 1997
- --------------------------------------------- Executive Officer
(Michael O. Maffie)
/s/ CAROLYN M. SPARKS Director March 26, 1997
- ---------------------------------------------
(Carolyn M. Sparks)
/s/ ROBERT S. SUNDT Director March 26, 1997
- ---------------------------------------------
(Robert S. Sundt)
15
18
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------
10.11 Form of Employment Agreement with Company officers
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 1996 Annual Report incorporated into 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)