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CHARLOTTE, N.C., Aug. 5, 2021 /PRNewswire/ — NN, Inc. (NASDAQ: NNBR), a diversified industrial company, today reported its financial results for the second quarter ended June 30, 2021.

GAAP Results

Net sales for the second quarter of 2021 increased $44.6 million, or 56.8%, to $123.2 million, compared to $78.5 million for the second quarter of 2020, led by strong sales growth across both segments due to higher demand within markets that were negatively impacted by the COVID-19 pandemic in the prior year and new business in the general industrial market. Second quarter Mobile Solutions sales increased 80.0% and Power Solutions sales increased 31.4% compared to the prior year.

Loss from operations for the second quarter of 2021 was $1.6 million, compared to loss from operations of $11.2 million for the same period in 2020.  The reduction in loss from operations was primarily driven by an increase in sales volume and the ongoing impact of cost reduction initiatives, partially offset by the reinstatement of certain costs that were temporarily suspended in the prior year.

Income from operations for second quarter 2021 in the Mobile Solutions segment was $2.5 million, compared to loss from operations of $4.6 million for the same period in 2020.  Income from operations for second quarter 2021 in the Power Solutions segment was $2.9 million, compared to income from operations of $1.5 million for the same period in 2020.

Net loss for the second quarter of 2021 was $5.4 million, compared to net loss of $21.7 million for the same period in 2020. The reduction in net loss for the second quarter of 2021 was driven by the improvement in gross profit generated from incremental sales volume, as well as reductions in SG&A, interest expense, and overall loss from discontinued operations, which were partially offset by increases in other expenses due to foreign exchange effects on intercompany borrowings and litigation related expenses incurred during the second quarter.

Adjusted Results

Adjusted income from operations for the second quarter of 2021 was $3.2 million, compared to an adjusted loss from operations of $5.7 million for the same period in 2020. Adjusted EBITDA for the second quarter of 2021 was $13.4 million, or 10.9% of sales, versus $4.9 million, or 6.2% of sales, for the same period in 2020. Adjusted net loss for the second quarter of 2021 was $0.2 million, or $0.00 per diluted share, compared to adjusted net loss of $10.2 million, or $0.24 per diluted share, for the same period in 2020. Free cash flow for the second quarter of 2021 was a use of cash of $7.5 million, compared to net cash inflow of $1.3 million for the same period in 2020. Free cash flow within the second quarter of 2021 was impacted by $9.2 million in payments related to the sale of Life Sciences.

Warren Veltman, President and Chief Executive Officer, said, “NN’s strong momentum continued in the second quarter, with strong top-line growth driven by customer demand across our two segments. Higher sales and associated increases in gross profit, coupled with the continuing impact of our cost reduction efforts, contributed to the improvement in our bottom line during the quarter.  While we are continuing to see the impact of supply chain challenges on some of our customers due to the continuing impact of the COVID-19 pandemic, we are optimistic on the long-term prospects for continued growth and profitability in our business.”

Mobile Solutions

Net sales for the second quarter of 2021 were $73.9 million, compared to $41.0 million in the second quarter of 2020, an increase of 80.0% or $32.8 million. The increase in sales was driven by higher demand within all markets that were negatively impacted by the COVID-19 pandemic in the prior year, as well as new business in the general industrial market. Adjusted income from operations for the second quarter of 2021 was $3.3 million, compared to $3.4 million of adjusted operating loss in the second quarter of 2020. Adjusted operating income increased as a result of the higher sales as well as a build-up of inventory to combat supply interruptions that resulted in favorable overhead absorption in the quarter. This was partially offset by the reintroduction of costs that were suspended in the prior year due to the COVID-19 pandemic, including certain benefits and overtime pay, as well as an increase in costs with the resumption of travel in the second quarter of 2021. 

Power Solutions

Net sales for the second quarter of 2021 were $49.3 million, compared to $37.5 million in the second quarter of 2020, an increase of 31.4% or $11.8 million. The increase in sales was driven primarily by demand within the end markets which were negatively impacted by the COVID-19 pandemic in the prior year, as well as the impact of higher precious metals prices, which are passed through to customers.  Adjusted income from operations for the second quarter was $5.7 million, compared to $4.7 million in the second quarter of 2020.  The increase in adjusted operating income was due primarily to higher sales volumes partially offset by lower margins on products that use precious metals as well as the reintroduction of expenses and benefits that were temporarily suspended in the prior year due to the COVID-19 pandemic.

Conference Call

NN will discuss its results during its quarterly investor conference call on August 6, 2021, at 9:00 a.m. ET.  The call and supplemental presentation may be accessed via NN’s website, www.nninc.com. The conference call can also be accessed by dialing 1-877-317-6789 or 1-412-317-6789, Conference ID: 10155662. For those who are unavailable to listen to the live broadcast, a replay will be available shortly after the call until August 6, 2022.

NN discloses in this press release the non-GAAP financial measures of adjusted income (loss) from operations, adjusted EBITDA, adjusted net income (loss), adjusted net income (loss) per diluted share, and free cash flow.  Each of these non-GAAP financial measures provides supplementary information about the impacts of restructuring and integration expense, acquisition and transition expenses, foreign exchange impacts on inter-company loans, amortization of intangibles and deferred financing costs, and other non-operating impacts on our business.

The financial tables found later in this press release include a reconciliation of adjusted income (loss) from operations, adjusted operating margin, adjusted EBITDA, adjusted EBITDA margin, adjusted net income (loss), adjusted net income (loss) per diluted share, and free cash flow to the U.S. GAAP financial measures of income (loss) from operations, net income (loss), net income (loss) per diluted share, and cash provided (used) by operating activities.

About NN, Inc.

NN, Inc., a diversified industrial company, combines advanced engineering and production capabilities with in-depth materials science expertise to design and manufacture high-precision components and assemblies for a variety of markets on a global basis. Headquartered in Charlotte, North Carolina, NN has 31 facilities in North America, Europe, South America, and China.

Except for specific historical information, many of the matters discussed in this press release may express or imply projections of revenues or expenditures, statements of plans and objectives or future operations or statements of future economic performance. These, and similar statements, are forward-looking statements concerning matters that involve risks, uncertainties and other factors which may cause the actual performance of NN, Inc. and its subsidiaries to differ materially from those expressed or implied by this discussion. All forward-looking information is provided by the Company pursuant to the safe harbor established under the Private Securities Litigation Reform Act of 1995 and should be evaluated in the context of these factors. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “assumptions”, “target”, “guidance”, “outlook”, “plans”, “projection”, “may”, “will”, “would”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “potential” or “continue” (or the negative or other derivatives of each of these terms) or similar terminology. Factors which could materially affect actual results include, but are not limited to: general economic conditions and economic conditions in the industrial sector, the impacts of the coronavirus (COVID-19) pandemic on the Company’s financial condition, business operations and liquidity, inventory levels, regulatory compliance costs and the Company’s ability to manage these costs, start-up costs for new operations, debt reduction, competitive influences, risks that current customers will commence or increase captive production, risks of capacity underutilization, quality issues, availability and price of raw materials, currency and other risks associated with international trade, the Company’s dependence on certain major customers, and the successful implementation of the global growth plan including development of new products. Similarly, statements made herein and elsewhere regarding pending and completed transactions are also forward-looking statements, including statements relating to the future performance and prospects of an acquired business, the expected benefits of an acquisition on the Company’s future business and operations and the ability of the Company to successfully integrate recently acquired businesses.

For additional information concerning such risk factors and cautionary statements, please see the section titled “Risk Factors” in the Company’s periodic reports filed with the Securities and Exchange Commission, including, but not limited to, the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, and, when filed, the Company’s Quarterly Report on Form 10-Q for the three months ended June 30, 2021. Except as required by law, we undertake no obligation to update or revise any forward-looking statements we make in our press releases, whether as a result of new information, future events or otherwise.

FOR FURTHER INFORMATION:

Mike Danehy, CPA
Investor Relations Contact
[email protected]
(980) 264-4312

Financial Tables Follow

 

 

 

 

 

 

 

The Company discloses in this presentation the non-GAAP financial measures of adjusted income (loss) from operations, adjusted EBITDA, adjusted net income (loss), adjusted net income (loss) per diluted share, free cash flow and net debt.  Each of these non-GAAP financial measures provides supplementary information about the impacts of acquisition, divestiture and integration related expenses, foreign-exchange impacts on inter-company loans, reorganizational and impairment charges.  Over the past five years, we have completed several acquisitions, one of which was transformative for the Company, and sold two of our businesses.  The costs we incurred in completing such acquisitions, including the amortization of intangibles and deferred financing costs, and these divestitures have been excluded from these measures because their size and inconsistent frequency are unrelated to our commercial performance during the period, and which we believe are not indicative of our ongoing operating costs. We exclude the impact of currency translation from these measures because foreign exchange rates are not under management’s control and are subject to volatility. Other non-operating charges are excluded as the charges are not indicative of our ongoing operating cost. We believe the presentation of adjusted income (loss) from operations, adjusted EBITDA, adjusted net income (loss), adjusted net income (loss) per diluted share, free cash flow and net debt provides useful information in assessing our underlying business trends and facilitates comparison of our long-term performance over given periods.

The non-GAAP financial measures provided herein may not provide information that is directly comparable to that provided by other companies in the Company’s industry, as other companies may calculate such financial results differently. The Company’s non-GAAP financial measures are not measurements of financial performance under GAAP and should not be considered as alternatives to actual income growth derived from income amounts presented in accordance with GAAP. The Company does not consider these non-GAAP financial measures to be a substitute for, or superior to, the information provided by GAAP financial results.

(a) Non-GAAP Adjusted income (loss) from operations represents GAAP income (loss) from operations, adjusted to exclude the effects of restructuring and integration expense; non-operational charges related to acquisition and transition expense, intangible amortization costs for fair value step-up in values related to acquisitions, non-cash impairment charges, and when applicable, our share of income from joint venture operations. We believe this presentation is commonly used by investors and professional research analysts in the valuation, comparison, rating, and investment recommendations of companies in the industrial industry. We use this information for comparative purposes within the industry. Non-GAAP adjusted income (loss) from operations is not a measure of financial performance under GAAP and should not be considered as a measure of liquidity or as an alternative to GAAP income (loss) from operations.

(b) Non-GAAP adjusted EBITDA represents GAAP net income (loss), adjusted to include income taxes, interest expense, write-off of unamortized debt issuance costs, interest rate swap payments and change in fair value, change in fair value of preferred stock derivatives and warrants, depreciation and amortization, charges related to acquisition and transition costs, non-cash stock compensation expense, foreign exchange gain (loss) on inter-company loans, restructuring and integration expense, costs related to divested businesses and litigation settlements, income from discontinued operations, and non-cash impairment charges, to the extent applicable. We believe this presentation is commonly used by investors and professional research analysts in the valuation, comparison, rating, and investment recommendations of companies in the industrial industry. We use this information for comparative purposes within the industry. Non-GAAP adjusted EBITDA is not a measure of financial performance under GAAP and should not be considered as a measure of liquidity or as an alternative to GAAP income (loss) from continuing operations.

(c) This line item reflects the aggregate tax effect of all non-tax adjustments reflected in the respective table. NN, Inc. estimates the tax effect of the adjustment items identified in the reconciliation schedule above by applying the applicable statutory rates by tax jurisdiction unless the nature of the item and/or the tax jurisdiction in which the item has been recorded requires application of a specific tax rate or tax treatment.

(d) Non-GAAP adjusted net income (loss) represents GAAP  net income (loss) adjusted to exclude the tax-affected effects of charges related to acquisition and transition costs, foreign exchange gain (loss) on inter-company loans, restructuring and integration charges, amortization of intangibles costs for fair value step-up in values related to acquisitions and amortization of deferred financing costs, non-cash impairment charges, write-off of unamortized debt issuance costs, interest rate swap payments and change in fair value, change in fair value of preferred stock derivatives and warrants, costs related to divested businesses and litigation settlements, income (loss) from discontinued operations, and preferred stock cumulative dividends and deemed dividends. We believe this presentation is commonly used by investors and professional research analysts in the valuation, comparison, rating, and investment recommendations of companies in the industrial industry. We use this information for comparative purposes within the industry. Non-GAAP adjusted income (loss) from segment operations is not a measure of financial performance under GAAP and should not be considered as a measure of liquidity or as an alternative to GAAP income (loss) from continuing operations.

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SOURCE NN, Inc.

NORTHBOROUGH, Mass., Aug. 5, 2021 /PRNewswire/ — Aspen Aerogels, Inc. (NYSE: ASPN) (“Aspen“) today announced that it will participate in a fireside chat at the 41^st Annual Canaccord Genuity Growth Conference to be held virtually this year. The fireside chat will take place on Wednesday, August 11, 2021 at 8:30 a.m. Eastern Time. Participating for Aspen will be Donald R. Young, President and CEO and John F. Fairbanks, VP, CFO and Treasurer. Registration for the live audio webcast of the fireside chat is available here and on the Investors section of the Aspen Aerogels website at www.aerogel.com.  A replay of the company’s presentation will also be available on the Investors section of the Aspen Aerogels website at the conclusion of the event.

About Aspen Aerogels, Inc.

Aspen is a technology leader in sustainability. The company’s aerogel technology enables its customers and partners to achieve their own objectives around the global megatrends of resource efficiency, e-mobility and clean energy. Aspen’s PyroThin^TM products enable solutions to thermal runaway challenges within the electric vehicle market. The company’s carbon aerogel program seeks to increase the performance of lithium-ion battery cells to enable EV manufacturers to extend the driving range and reduce the cost of electric vehicles. Aspen’s Spaceloft^® products provide building owners with industry-leading energy efficiency and fire safety. The company’s Cryogel^® and Pyrogel^® products are valued by the world’s largest energy infrastructure companies. Aspen’s strategy is to partner with world-class industry leaders to leverage its aerogel technology platform into additional high-value markets. Headquartered in Northborough, Mass., Aspen manufactures its products at its East Providence, R.I. facility. For more information, please visit www.aerogel.com 

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SOURCE Aspen Aerogels, Inc.

SHANGHAI, Aug. 5, 2021 /PRNewswire/ – Ossen Innovation Co., Ltd. (the “Company“) (Nasdaq: OSN), a China-based manufacturer of an array of plain surface, rare earth and zinc coated pre-stressed steel materials, today announced it has called an extraordinary general meeting of shareholders (the “EGM“), to be held on September 9, 2021 at 10:00 A.M. (Beijing Time), at the Company’s principal executive office at 518 Shangcheng Road, Floor 17, Shanghai, 200120, People’s Republic of China, to consider and vote on, among other things, the proposal to authorize and approve the previously announced agreement and plan of merger (the “Merger Agreement“), dated December 17, 2020 and amended on June 16, 2021, by and among the Company, New Ossen Group Limited, an exempted company with limited liability incorporated under the laws of the British Virgin Islands (“Parent“), and New Ossen Innovation Limited, an exempted company with limited liability incorporated under the laws of the British Virgin Islands and a wholly-owned Subsidiary of Parent (“Merger Sub“), and the articles of merger and plan of merger to be filed with the Registrar of Corporate Affairs of the British Virgin Islands for the purposes of the merger (the “Plan of Merger“), and any and all transactions contemplated thereby, including the merger.

Pursuant to the Merger Agreement and the Plan of Merger, at the effective time of the merger (the “Effective Time“), the Merger Sub will merge with and into the Company, with the Company continuing as the surviving company and becoming a wholly-owned subsidiary of the Parent. If consummated, the merger would result in the Company becoming a privately held company and the ADS program will be terminated. At the Effective Time, each common share of the Company (“Share“) (other than Shares represented by American Depository Shares (“ADS“)) issued and outstanding immediately prior to the Effective Time will be cancelled and cease to exist in exchange for the right to receive US$1.70 per Share in cash and without interest (“Per Share Merger Consideration“). Each ADS issued and outstanding immediately prior to the Effective Time, together with each Share represented by such ADS, will be cancelled and cease to exist in exchange for the right to receive US$5.10 per ADS (less US$0.05 per ADS cancellation fee payable pursuant to the terms of the deposit agreement dated June 30, 2020 by and among the Company, the Bank of New York Mellon (the “ADS depositary“), and all holders and beneficial owners from time to time of ADSs issued thereunder) (“Per ADS Merger Consideration“). Any holders of Excluded Shares and Dissenting Shares (as such terms are defined in the Merger Agreement), and ADSs representing such Shares are not entitled to receive any Per Share Merger Consideration or Per ADS Merger Consideration. 

The Company’s board of directors (the “Board“), acting upon the unanimous recommendation of a committee of independent directors established by the Board, composed of two independent and disinterested directors of the Company who are unaffiliated with the Company, any of the management members of the Company, or any person participating as a buyer or rollover shareholder in the merger, authorized and approved the execution, delivery and performance of the Merger Agreement, the Plan of Merger, and the consummation of the transactions contemplated thereby, including the merger, and recommends that the Company’s shareholders vote FOR (1) the proposal to authorize and approve the execution, delivery and performance of the Merger Agreement, the Plan of Merger, and the consummation of the transactions contemplated thereby, including the merger, and FOR (2) the proposal to adjourn the EGM in order to allow the Company to solicit additional proxies in the event that there are insufficient proxies received to pass the shareholders resolution during the extraordinary general meeting.

Shareholders of record at the close of business in the British Virgin Islands on August 10, 2021 will be entitled to attend and vote at the EGM and any adjournment thereof. The record date for holders of ADSs entitled to instruct the ADS depositary to vote the Shares represented by the ADSs is at the close of business on August 10, 2021.

Additional information regarding the EGM and the Merger Agreement can be found in the transaction statement on Schedule 13E-3 and the definitive proxy statement attached as Exhibit (a)-(1) thereto, as amended, filed with the U.S. Securities and Exchange Commission (the “SEC“) on August 5, 2021, which can be obtained, along with other filings containing information about the Company, the proposed merger, and related matters, without charge, from the SEC’s website www.sec.gov. Requests for additional copies of the definitive proxy statement should be directed to the Company at +(86) 21 6888-8886 or e-mail at [email protected]. SHAREHOLDERS AND ADS HOLDERS ARE URGED TO READ CAREFULLY AND IN THEIR ENTIRETY THESE MATERIALS AND OTHER MATERIALS FILED WITH OR FURNISHED TO THE SEC WHEN THEY BECOME AVAILABLE, AS THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE COMPANY, THE PROPOSED MERGER, AND RELATED MATTERS.

About Ossen Innovation Co., Ltd.

Ossen Innovation Co., Ltd. manufactures and sells a wide variety of plain surface pre-stressed steel materials and rare earth coated and zinc coated pre-stressed steel materials. The Company’s products are mainly used in the construction of bridges, as well as in highways and other infrastructure projects. The Company has two manufacturing facilities located in Maanshan, Anhui Province, and Jiujiang, Jiangxi Province.

Safe Harbor Statements

This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including risks outlined in the Company’s public filings with the Securities and Exchange Commission. All information provided in this press release is as of the date hereof. Except as required by law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.

For more information, please contact:

Wei Hua, Chief Executive Officer
Email: [email protected]
Phone: +86-21-6888-8886
Web: www.osseninnovation.com

Investor Relations
GIC IR
Phone: +1-917-828-3419
Email: [email protected]

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SOURCE Ossen Innovation Co., Ltd.

LAS VEGAS, Aug. 5, 2021 /PRNewswire/ — Southwest Gas Holdings, Inc. (NYSE: SWX) announced consolidated earnings of $0.43 per diluted share for the second quarter of 2021, a $0.25 decrease from consolidated earnings of $0.68 per diluted share for the second quarter of 2020. Consolidated current-quarter results include $3.1 million, or $0.05 per share, in other income due to increases in the cash surrender value of company-owned life insurance (“COLI”) policies, while the prior-year quarter included $12 million of COLI-related income, or $0.22 per share. Consolidated net income was $25.1 million for the second quarter of 2021, compared to consolidated net income of $38 million for the second quarter of 2020. The natural gas segment had net income of $11.4 million for the second quarter of 2021 compared to net income of $11.9 million for the second quarter of 2020, while the utility infrastructure services segment had net income of $15.1 million in the second quarter of 2021 compared to net income of $26.3 million in the second quarter of 2020. Due to the seasonal nature of the Company’s businesses, results for quarterly periods are not generally indicative of earnings for a complete twelve-month period.

Commenting on the performance and outlook of Southwest Gas Holdings, John P. Hester, President and Chief Executive Officer, said: “We are pleased that many communities we serve have continued to experience solid growth throughout these turbulent economic times. As new companies move in and industries expand, good incremental jobs are being added to our local economies. This further encourages migration from other parts of the country, increasing demand for energy and creating growth opportunities for our Company. We added 37,000 new utility customers over the past twelve months and continue to connect new customers to our expanded service territories in Mesquite and Spring Creek, Nevada.

“We are excited about the growth we also see in our infrastructure services business. Over the past twelve months, Centuri reached a new level of revenues – $2 billion. In June, we signed an agreement to purchase Riggs Distler & Company, Inc., which will expand our infrastructure services footprint in the Northeast and Mid-Atlantic regions of the country. This transformational acquisition brings exciting growth opportunities in 5G telecom and renewable power services; and expands our service offerings to current combination utility customers.”

For the twelve months ended June 30, 2021, consolidated net income was $264.2 million, or $4.60 per diluted share, compared to $207.6 million, or $3.76 per diluted share, for the twelve-month period ended June 30, 2020. The current twelve-month period includes an $18.5 million, or $0.32 per share, increase in the cash surrender values of COLI policies, while the prior-year period included COLI-related income of $2.9 million, or $0.05 per share. Natural gas segment net income was $193.7 million in the current twelve–month period compared to $152 million in the prior-year period. Utility infrastructure services segment net income was $73.1 million in the current twelve-month period and $57.6 million in the prior-year period.

Natural Gas Operations Segment Results

Second Quarter

Operating margin increased $21 million between quarters. Approximately $2 million of incremental margin was attributable to customer growth from 37,000 first-time meter sets during the last twelve months, while rate relief added approximately $15 million of margin. Also contributing to the increase were late fees that were $1.8 million greater in the current quarter. A moratorium on such fees commenced in all of our territories in March 2020; however, resumption of the assessments in Arizona and Nevada occurred in April 2021. Amounts collected from and returned to customers associated with regulatory account balances, as well as differences in miscellaneous revenue and margin from customers outside the decoupling mechanisms, also impacted the variance between quarters.

Operations and maintenance expense increased $3.8 million, or 4%, between quarters primarily due to higher customer service-related costs, increased expenditures for pipeline damage prevention programs, and an increase in the service-related component of employee pension cost and other benefits. Depreciation and amortization increased $4.4 million, or 8%, between quarters due to a $549 million, or 7%, increase in average gas plant in service. Amortization related to regulatory account recoveries increased approximately $1.1 million between quarters. The increase in gas plant was attributable to pipeline capacity reinforcement work, franchise requirements, scheduled pipe replacement activities, and new infrastructure, as well as expenditures toward our new customer service system, which was placed in production in May 2021. Taxes other than income taxes increased $4 million between quarters due to an increase in Arizona property taxes. 

Other income decreased $9 million between quarters primarily due to a decline in income associated with COLI policies. The current quarter reflects a $3.1 million increase in COLI policy cash surrender values and recognized death benefits, while the prior-year quarter reflected a $12 million increase. Amounts associated with the allowance for funds used during construction (“AFUDC”) are also lower in the current quarter. Offsetting these combined impacts is a decrease in the non-service-related components of employee pension and other postretirement benefit costs between quarters.

Income tax expense in both quarters includes the amortization of excess accumulated deferred income tax (“EADIT”) balances and the impacts of COLI cash surrender value increases, which are recognized without tax consequences.

Twelve Months to Date

Operating margin increased $54 million between the comparative twelve-month periods ended June 30, 2021 and 2020. Customer growth provided approximately $14 million, and combined rate relief provided $39 million of incremental operating margin. Offsetting these impacts was a reduction in late fees ($3.8 million) due to the pandemic-period moratorium on these fees from March 2020 through April 2021. Regulatory account balance surcharges impacted both periods, in addition to margin from customers outside the decoupling mechanisms.

Operations and maintenance expense decreased $803,000 between periods. Lower travel and in-person training costs in the COVID-19 environment and other cost saving initiatives by management more than offset higher levels of service-related pension and post-retirement benefit costs, expenditures for pipeline damage prevention programs associated with a growing infrastructure and customer base, and information technology and customer-related costs. Depreciation and amortization expense increased $17.1 million, or 8%, between periods due to a $604 million, or 8%, increase in average gas plant in service since the corresponding period in the prior year and a $1.2 million increase in regulatory amortization. Taxes other than income taxes increased $9 million between periods primarily due to an increase in property taxes in Arizona.

Other income increased $16.2 million between comparative twelve-month periods, reflective of the $18.5 million increase in COLI policy cash surrender values and recognized death benefits in the current period, while the prior-year period reflected a $2.9 million increase in values. 

Income tax expense in both periods reflects that COLI results are recognized without tax consequences, and the impacts of amortization of EADIT balances.

Utility Infrastructure Services Segment Results

Second Quarter

Utility infrastructure revenues increased $33.8 million in the second quarter of 2021 when compared to the prior-year quarter, primarily due to increased work under gas infrastructure blanket and bid contracts with certain customers in the central and eastern U.S. regions and Canada. Revenues from electric infrastructure services increased $2.4 million in the second quarter of 2021 when compared to the prior-year quarter, including an offsetting reduction in emergency restoration storm support services of $4 million due to the unpredictable nature of weather-related events. Storm restoration work typically generates a higher profit margin than core infrastructure services, due to improved operating efficiencies related to equipment utilization and absorption of fixed costs. Partially offsetting the increased revenues in the above noted regions was reduced work with two significant customers during the second quarter of 2021 (totaling $27 million), due to timing and mix of projects under each customer’s multi-year capital spending programs.

Utility infrastructure services expenses increased $48.4 million between quarters, primarily due to costs to complete gas infrastructure work. The significant reductions in revenue from major customers, as discussed above, had an unfavorable impact on profit margins due to reduced operating efficiencies from equipment and facility utilization and under-absorption of other fixed costs. The prior-year period was favorably impacted by certain customers’ response to COVID-19, which allowed for an increase in main line replacement work as compared to service-line related work, resulting in greater operating efficiencies. Higher fuel costs and equipment rental expense were also incurred due to the mix of work and in support of growth in our electric infrastructure business. Centuri recognized $1.8 million in wage and rent subsidies from the Canadian government amidst the continuing COVID-19 environment during the second quarter of 2021, compared to $3.4 million in subsidies received in the prior-year quarter. These subsidies were recorded as a reduction in utility infrastructure services expense. Also included in utility infrastructure services expenses were general and administrative costs, which increased $1 million in 2021 compared to 2020 (including approximately $600,000 in professional fees related to Centuri’s pending acquisition of Riggs Distler & Company).

Depreciation and amortization increased $1.2 million between quarters, attributable to equipment purchased to support the growing volume of infrastructure work. Depreciation expense, relative to the revenues recorded, was generally consistent during the second quarter of 2021 compared to the prior-year quarter.

Net interest deductions decreased $600,000 between periods due to lower incremental borrowing rates associated with decreased outstanding borrowings under Centuri’s $590 million secured revolving credit and term loan facility.

Twelve Months to Date

Utility infrastructure revenues increased $200.5 million, or 11%, in the current twelve-month period when compared to the prior-year period, primarily due to incremental electric infrastructure revenues of $134.2 million from expansion of work with existing customers and securing work with new customers. Included in the incremental electric infrastructure revenues during the twelve-month period of 2021 was $86.5 million from emergency restoration services performed by Linetec following hurricane, tornado, and other storm damage to customers’ above-ground utility infrastructure in and around the Gulf Coast and eastern regions of the U.S., as compared to $13.6 million in similar services during the twelve-month period in 2020. Centuri’s revenues derived from storm-related services vary from period to period due to the unpredictable nature of weather-related events. The remaining increase in revenue was attributable to continued growth with existing gas infrastructure customers under master service and bid agreements.

Utility infrastructure services expenses increased $174 million between periods, largely due to incremental costs related to electric infrastructure work of $87.2 million, including costs associated with storm restoration work, and costs necessary for the completion of additional gas infrastructure work. Also included in utility infrastructure services expenses were general and administrative costs, which increased $19.5 million during the twelve-month period in 2021, when compared to 2020, due to higher payroll and operating costs associated with continued growth of the business and higher profit-based incentive compensation. Offsetting these increases were lower insurance costs from favorable claims experience under Centuri’s self-insurance programs. Gains on sale of equipment (reflected as an offset to utility infrastructure services expenses) were $5.6 million and $4.9 million for the twelve-month periods of 2021 and 2020, respectively. 

Depreciation and amortization expense increased $6.1 million between periods primarily due to incremental depreciation ($4.3 million) related to assets supporting electric infrastructure services. The remaining increase is attributable to property and equipment purchased to support the growing volume of work being performed.

Net interest deductions decreased $5.1 million between periods primarily due to lower incremental borrowing rates associated with decreased outstanding borrowings under Centuri’s $590 million secured revolving credit and term loan facility.

Outlook for 2021

Management affirms its estimated 2021 diluted earnings per share to be between $4.00 and $4.20. These expectations exclude results or costs that would be experienced upon Centuri completing its planned acquisition of Riggs Distler & Company, Inc.

Highlights of 2021 expectations (excluding the planned acquisition) are as follows:

Natural Gas Operations Segment:

• Operating margin for 2021 is anticipated to benefit from customer growth (1.7%), rate relief in all three states in which we operate, expansion projects, and infrastructure tracker mechanisms. Combined, these items are expected to produce an increase in operating margin of 6% to 8%.
• Total pension costs are expected to be relatively flat compared to 2020, but will be reflected as an increase in operations and maintenance cost of about $6 million, with a comparable decrease to other expense (associated with non-service-related pension costs).
• Operating income is expected to increase 3% to 5%.
• COLI earnings of $3 million to $5 million are included for full-year 2021 projections.
• Capital expenditures in 2021 are estimated at approximately $700 million, in support of customer growth, system improvements, and pipe replacement programs.

Utility Infrastructure Services Segment (excluding the planned acquisition):

• Centuri’s revenues for 2021 are expected to be 1% to 4% greater than the record 2020 amount (which included $82 million of emergency storm restoration services).
• Operating income is expected to be approximately 5.3% to 5.8% of revenues.
• Interest expense is expected to be $7 million to $8 million.
• Net income expectations reflect earnings attributable to Southwest Gas Holdings, net of earnings attributable to noncontrolling interests (estimated between $5 million and $6 million). Changes in Canadian exchange rates could influence results.

Southwest Gas Holdings has two business segments:

Southwest Gas Corporation provides safe and reliable natural gas service to over 2 million customers in Arizona, Nevada, and California. 

Centuri Group, Inc. is a comprehensive utility infrastructure services enterprise dedicated to delivering a diverse array of solutions to North America’s gas and electric providers. Centuri derives revenues primarily from installation, replacement, repair, and maintenance of energy distribution systems.

Forward-Looking Statements:

 This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements include, without limitation, statements regarding Southwest Gas Holdings, Inc. (the “Company”) and the Company’s expectations or intentions regarding the future. These forward-looking statements can often be identified by the use of words such as “will”, “predict”, “continue”, “forecast”, “expect”, “believe”, “anticipate”, “outlook”, “could”, “target”, “project”, “intend”, “plan”, “seek”, “estimate”, “should”, “may” and “assume”, as well as variations of such words and similar expressions referring to the future, and include (without limitation) statements regarding expectations of continuing growth in 2021. In addition, the statements under the heading “Outlook for 2021” that are not historic, constitute forward-looking statements. A number of important factors affecting the business and financial results of the Company could cause actual results to differ materially from those stated in the forward-looking statements. These factors include, but are not limited to, the timing and amount of rate relief, changes in rate design, customer growth rates, the effects of regulation/deregulation, tax reform and related regulatory decisions, the impacts of construction activity at Centuri, future earnings trends, seasonal patterns, and the impacts of stock market volatility. In addition, the Company can provide no assurance that its discussions about future operating margin, operating income, pension costs, COLI results, and capital expenditures of the natural gas segment will occur. Likewise, the Company can provide no assurance that discussions regarding utility infrastructure services segment revenues, operating income as a percentage of revenues, interest expense, and noncontrolling interest amounts will transpire, nor assurance regarding acquisitions or their impacts, including management’s plans related thereto, such as that currently planned in regard to Riggs. Because of these and other factors, the Company can provide no assurances that estimates of 2021 earnings per share will be realized. Factors that could cause actual results to differ also include (without limitation) those discussed under the heading “Risk Factors” in Southwest Gas Holdings, Inc.’s most recent Annual Report on Form 10-K and in the Company’s and Southwest Gas Corporation’s current and periodic reports filed from time to time with the SEC. The statements in this press release are made as of the date of this press release, even if subsequently made available by the Company on its Web site or otherwise. The Company does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.

Non-GAAP Measures.

 Southwest recognizes operating revenues from the distribution and transportation of natural gas (and related services) to customers. Gas cost is a tracked cost, which is passed through to customers without markup under purchased gas adjustment (“PGA”) mechanisms, impacting revenues and net cost of gas sold on a dollar-for-dollar basis, thereby having no impact on Southwest’s profitability. Therefore, management routinely uses operating margin, defined as operating revenues less the net cost of gas sold, in its analysis of Southwest’s financial performance. Operating margin also forms a basis for Southwest’s various regulatory decoupling mechanisms. Operating margin is not, however, specifically defined in accounting principles generally accepted in the United States (“U.S. GAAP”) and is considered a non-GAAP measure. Management believes supplying information regarding operating margin provides investors and other interested parties with useful and relevant information to analyze Southwest’s financial performance in a rate-regulated environment. (Refer to the Southwest Gas Holdings, Inc. Consolidated Earnings Digest for a reconciliation of revenues to operating margin.)

 

 

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SOURCE Southwest Gas Holdings, Inc.