UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2017~~

March 31, 2019



Commission File Number	Exact name of registrant as specified in its charter and principal office address and telephone number	State of Incorporation			I.R.S. Employer Identification No.
001-37976	Southwest Gas Holdings, Inc.		California			81-3881866
	~~5241 Spring Mountain Road~~
	~~Post Office Box 98510~~
	~~Las Vegas, Nevada 89193-8510~~
	~~(702) 876-7237~~ 5241 Spring Mountain Road
	Post Office Box 98510
	Las Vegas, Nevada 89193-8510
	(702) 876-7237

1-7850	Southwest Gas Corporation	California		88-0085720
	~~California~~ 5241 Spring Mountain Road			~~88-0085720~~
	Post Office Box 98510
	~~5241 Spring Mountain Road~~
	~~Post Office Box 98510~~
	Las Vegas, Nevada 89193-8510
	(702) 876-7237



Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol	Name of each exchange on which registered
Southwest Gas Holdings, Inc. Common Stock, $1 Par Value	SWX	New York Stock Exchange

Indicate by check mark whether each ~~registrant~~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~~each 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 whether each registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that ~~the~~each registrant was required to submit ~~and post~~ such files). Yes ☒x No ☐

Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”~~“non-accelerated~~ “non-accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule12b-2 of the Exchange Act.

Southwest Gas Holdings, Inc.:



Large accelerated filer	☒ x		Accelerated filer	☐

~~Non-accelerated filer~~		☐
Non-accelerated filer	☐		Smaller reporting company	☐

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Southwest Gas Corporation:



Large accelerated filer	☐		Accelerated filer	☐

~~Non-accelerated filer~~		☒
Non-accelerated filer	x		Smaller reporting company	☐

Emerging growth company	☐	��

Indicate by check mark whether each registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

Southwest Gas Holdings, Inc. Common Stock, $1 Par Value, ~~47,731,840~~53,396,583 shares as of ~~October 27, 2017.~~

April 30, 2019.

All of the outstanding shares of common stock ($1 par value) of Southwest Gas Corporation were held by Southwest Gas Holdings, Inc. as of ~~January 1, 2017.~~

April 30, 2019.

SOUTHWEST GAS CORPORATION MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION (H)(1)(a) and (b) OF FORM10-Q AND IS THEREFORE FILING THIS REPORT WITH THE REDUCED DISCLOSURE FORMAT AS PERMITTED BY GENERAL INSTRUCTION H(2).



	1



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		~~September 30, 2017~~March 31, 2019

FILING FORMAT

This quarterly report onForm 10-Q is a combined report being filed by two separate registrants: Southwest Gas Holdings, Inc. and Southwest Gas Corporation. Except where the content clearly indicates otherwise, any reference in the report to “we,” “us” or “our” is to the holding company or the consolidated entity of Southwest Gas Holdings, Inc. and all of its subsidiaries, including Southwest Gas Corporation, which is a distinct registrant that is a wholly owned subsidiary of Southwest Gas Holdings, Inc. Information contained herein relating to any individual company is filed by such company on its own behalf. Each company makes representations only as to itself and makes no other representation whatsoever as to any other company.

Part I—Financial information in this Quarterly Report on Form10-Q includes separate financial statements (i.e., balance sheets, statements of income, statements of comprehensive income, and statements of cash flows) for Southwest Gas Holdings, Inc. and Southwest Gas Corporation, in that order. The Notes to the Condensed Consolidated Financial Statements are presented on a combined basis for both entities. All Items other than Part I – Item 1 are combined for the reporting companies.



	2



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		~~September 30, 2017~~March 31, 2019

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SOUTHWEST GAS HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Thousands of dollars, except par value)

(Unaudited)

   SEPTEMBER 30,
2017 DECEMBER 31,
2016
ASSETS

Utility plant:

Gas plant
   $ 6,440,547 $ 6,193,564
Less: accumulated depreciation
   (2,218,796 ) (2,172,966 )
Acquisition adjustments, net
   81 196
Construction work in progress
   164,030 111,177


Net utility plant
   4,385,862 4,131,971


Other property and investments
   369,303 342,343


Current assets:

Cash and cash equivalents
   59,152 28,066
Accounts receivable, net of allowances
   301,792 285,145
Accrued utility revenue
   34,100 76,200
Income taxes receivable, net
   5,462 4,455
Deferred purchased gas costs
   6,230 2,608
Prepaids and other current assets
   132,182 136,833


Total current assets
   538,918 533,307


Noncurrent assets:

Goodwill
   147,865 139,983
Deferred income taxes
   1,467 1,288
Deferred charges and other assets
   411,655 432,234


Total noncurrent assets
   560,987 573,505


Total assets
   $ 5,855,070 $ 5,581,126


CAPITALIZATION AND LIABILITIES

Capitalization:

Common stock, $1 par (authorized—60,000,000 shares; issued and outstanding—47,731,840 and 47,482,068 shares)
   $ 49,362 $ 49,112
Additionalpaid-in capital
   924,213 903,123
Accumulated other comprehensive income (loss), net
   (42,818 ) (48,008 )
Retained earnings
   784,934 759,263


Total Southwest Gas Holdings, Inc. equity
   1,715,691 1,663,490
Noncontrolling interest
   (2,295 ) (2,217 )


Total equity
   1,713,396 1,661,273
Redeemable noncontrolling interest
   —   22,590
Long-term debt, less current maturities
   1,731,981 1,549,983


Total capitalization
   3,445,377 3,233,846


Current liabilities:

Current maturities of long-term debt
   28,453 50,101
Short-term debt
   110,500 —
Accounts payable
   159,382 184,669
Customer deposits
   70,162 72,296
Income taxes payable
   1,543 1,909
Accrued general taxes
   48,998 42,921
Accrued interest
   24,543 17,939
Deferred purchased gas costs
   14,971 90,476
Other current liabilities
   197,854 168,064


Total current liabilities
   656,406 628,375


Deferred income taxes and other credits:

Deferred income taxes and investment tax credits
   894,011 840,653
Accumulated removal costs
   312,000 308,000
Other deferred credits and other long-term liabilities
   547,276 570,252


Total deferred income taxes and other credits
   1,753,287 1,718,905


Total capitalization and liabilities
   $ 5,855,070 $ 5,581,126



	March 31, 2019			December 31, 2018
ASSETS
Utility plant:
Gas plant	$	7,268,255		$	7,134,239
Less: accumulated depreciation	(2,257,017		)	(2,234,029		)
Construction work in progress	204,370			193,028
Net utility plant	5,215,608			5,093,238
Other property and investments	716,722			623,551
Current assets:
Cash and cash equivalents	97,037			85,361
Accounts receivable, net of allowances	429,248			413,926
Accrued utility revenue	47,000			77,200
Income taxes receivable	14,069			14,653
Deferred purchased gas costs	65,242			4,928
Prepaid and other current assets	177,784			243,701
Total current assets	830,380			839,769
Noncurrent assets:
Goodwill	364,482			359,045
Deferred income taxes	1,074			1,264
Deferred charges and other assets	441,166			440,862
Total noncurrent assets	806,722			801,171
Total assets	$	7,569,432		$	7,357,729
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock, $1 par (authorized - 60,000,000 shares; issued and outstanding - 53,391,731 and 53,026,848 shares)	$	55,021		$	54,656
Additional paid-in capital	1,332,793			1,305,769
Accumulated other comprehensive income (loss), net	(50,623		)	(52,668		)
Retained earnings	1,009,809			944,285
Total Southwest Gas Holdings, Inc. equity	2,347,000			2,252,042
Noncontrolling interest	(452		)	(452		)
Total equity	2,346,548			2,251,590
Redeemable noncontrolling interest	82,406			81,831
Long-term debt, less current maturities	2,106,274			2,107,258
Total capitalization	4,535,228			4,440,679
Current liabilities:
Current maturities of long-term debt	34,915			33,060
Short-term debt	188,000			152,000
Accounts payable	231,343			248,993
Customer deposits	68,593			67,940
Income taxes payable	—			1,083
Accrued general taxes	69,423			43,560
Accrued interest	31,439			21,369
Deferred purchased gas costs	72,213			79,762
Other current liabilities	278,552			290,878
Total current liabilities	974,478			938,645
Deferred income taxes and other credits:
Deferred income taxes and investment tax credits	556,063			529,201
Accumulated removal costs	385,000			383,000
Other deferred credits and other long-term liabilities	1,118,663			1,066,204
Total deferred income taxes and other credits	2,059,726			1,978,405
Total capitalization and liabilities	$	7,569,432		$	7,357,729

The accompanying notes are an integral part of these statements.



	3



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		~~September 30, 2017~~March 31, 2019

SOUTHWEST GAS HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)

   THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
   SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
   2017 2016 2017 2016 2017 2016
Operating revenues:

Gas operating revenues
   $ 213,059 $ 200,179 $ 935,823 $ 980,927 $ 1,276,308 $ 1,376,388
Construction revenues
   380,094 339,790 872,536 838,038 1,173,576 1,127,982


Total operating revenues
   593,153 539,969 1,808,359 1,818,965 2,449,884 2,504,370


Operating expenses:

Net cost of gas sold
   45,539 39,056 261,839 324,072 334,888 460,836
Operations and maintenance
   102,278 102,438 314,488 301,979 414,233 400,222
Depreciation and amortization
   58,529 69,845 189,089 217,764 260,457 286,977
Taxes other than income taxes
   14,046 12,480 43,325 39,480 56,221 51,810
Construction expenses
   342,629 300,611 806,586 757,919 1,073,090 1,009,188


Total operating expenses
   563,021 524,430 1,615,327 1,641,214 2,138,889 2,209,033


Operating income
   30,132 15,539 193,032 177,751 310,995 295,337


Other income and (expenses):

Net interest deductions
   (19,494 ) (18,158 ) (56,863 ) (54,100 ) (76,423 ) (71,884 )
Other income (deductions)
   2,876 2,565 8,788 6,756 11,501 10,861


Total other income and (expenses)
   (16,618 ) (15,593 ) (48,075 ) (47,344 ) (64,922 ) (61,023 )


Income (loss) before income taxes
   13,514 (54 ) 144,957 130,407 246,073 234,314
Income tax expense (benefit)
   3,094 (2,961 ) 47,411 43,046 82,833 80,255


Net income
   10,420 2,907 97,546 87,361 163,240 154,059
Net income attributable to noncontrolling interests
   216 435 170 500 684 1,079


Net income attributable to Southwest Gas Holdings, Inc.
   $ 10,204 $ 2,472 $ 97,376 $ 86,861 $ 162,556 $ 152,980


Basic earnings per share
   $ 0.21 $ 0.05 $ 2.05 $ 1.83 $ 3.42 $ 3.22


Diluted earnings per share
   $ 0.21 $ 0.05 $ 2.03 $ 1.82 $ 3.39 $ 3.20


Dividends declared per share
   $ 0.495 $ 0.450 $ 1.485 $ 1.350 $ 1.935 $ 1.755


Average number of common shares outstanding
   47,628 47,481 47,577 47,464 47,553 47,442
Average shares outstanding (assuming dilution)
   47,986 47,830 47,912 47,802 47,896 47,787



	Three Months Ended March 31,						Twelve Months Ended March 31,
	2019			2018			2019			2018
Operating revenues:
Gas operating revenues	$	520,677		$	494,313		$	1,384,092		$	1,334,019
Utility infrastructure services revenues	312,862			260,017			1,575,130			1,314,366
Total operating revenues	833,539			754,330			2,959,222			2,648,385
Operating expenses:
Net cost of gas sold	192,604			185,732			426,260			393,898
Operations and maintenance	106,245			102,351			410,287			390,819
Depreciation and amortization	77,539			62,478			264,273			240,951
Taxes other than income taxes	16,206			15,257			60,847			58,421
Utility infrastructure services expenses	300,465			258,952			1,429,202			1,215,959
Total operating expenses	693,059			624,770			2,590,869			2,300,048
Operating income	140,480			129,560			368,353			348,337
Other income and (expenses):
Net interest deductions	(26,397		)	(22,631		)	(100,437		)	(81,981		)
Other income (deductions)	6,839			(4,334		)	(6,253		)	(9,374		)
Total other income and (expenses)	(19,558		)	(26,965		)	(106,690		)	(91,355		)
Income before income taxes	120,922			102,595			261,663			256,982
Income tax expense	25,538			24,301			62,921			53,751
Net income	95,384			78,294			198,742			203,231
Net income (loss) attributable to noncontrolling interests	575			(797		)	747			(393		)
Net income attributable to Southwest Gas Holdings, Inc.	$	94,809		$	79,091		$	197,995		$	203,624
Basic earnings per share	$	1.78		$	1.63		$	3.91		$	4.23
Diluted earnings per share	$	1.77		$	1.63		$	3.91		$	4.23
Average number of common shares	53,369			48,416			50,640			48,105
Average shares (assuming dilution)	53,424			48,459			50,701			48,139

The accompanying notes are an integral part of these statements.



	4



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		~~September 30, 2017~~March 31, 2019

SOUTHWEST GAS HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Thousands of dollars)

(Unaudited)

   THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
   SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
   2017 2016 2017 2016 2017 2016
Net income
   $ 10,420 $ 2,907 $ 97,546 $ 87,361 $ 163,240 $ 154,059


Other comprehensive income (loss), net of tax

Defined benefit pension plans:

Net actuarial gain (loss)
   —   —   —   —   (14,118 ) (18,922 )
Amortization of prior service cost
   207 207 621 621 828 828
Amortization of net actuarial loss
   3,944 4,196 11,832 12,586 16,027 17,915
Regulatory adjustment
   (3,555 ) (3,796 ) (10,667 ) (11,388 ) (2,741 ) (404 )


Net defined benefit pension plans
   596 607 1,786 1,819 (4 ) (583 )


Forward-starting interest rate swaps:

Amounts reclassified into net income
   518 518 1,554 1,556 2,073 �� 2,073


Net forward-starting interest rate swaps
   518 518 1,554 1,556 2,073 2,073


Foreign currency translation adjustments
   1,012 (238 ) 1,861 614 1,408 233


Total other comprehensive income, net of tax
   2,126 887 5,201 3,989 3,477 1,723


Comprehensive income
   12,546 3,794 102,747 91,350 166,717 155,782
Comprehensive income attributable to noncontrolling interests
   198 427 181 521 679 1,089


Comprehensive income attributable to Southwest Gas Holdings, Inc.
   $ 12,348 $ 3,367 $ 102,566 $ 90,829 $ 166,038 $ 154,693



	Three Months Ended March 31,						Twelve Months Ended March 31,
	2019			2018			2019			2018
Net income	$	95,384		$	78,294		$	198,742		$	203,231
Other comprehensive income (loss), net of tax
Defined benefit pension plans:
Net actuarial gain (loss)	—			—			(15,524		)	(32,701		)
Amortization of prior service cost	241			254			1,002			875
Amortization of net actuarial loss	4,441			6,387			23,603			18,219
Regulatory adjustment	(4,063		)	(5,746		)	(4,574		)	10,400
Net defined benefit pension plans	619			895			4,507			(3,207		)
Forward-starting interest rate swaps (“FSIRS”):
Amounts reclassified into net income	635			635			2,541			2,190
Net forward-starting interest rate swaps	635			635			2,541			2,190
Foreign currency translation adjustments	791			(911		)	(1,308		)	640
Total other comprehensive income (loss), net of tax	2,045			619			5,740			(377		)
Comprehensive income	97,429			78,913			204,482			202,854
Comprehensive income (loss) attributable to noncontrolling interests	575			(797		)	747			(389		)
Comprehensive income attributable to Southwest Gas Holdings, Inc.	$	96,854		$	79,710		$	203,735		$	203,243

The accompanying notes are an integral part of these statements.



	5



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		~~September 30, 2017~~March 31, 2019

SOUTHWEST GAS HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Thousands of dollars)

(Unaudited)

   NINE MONTHS ENDED TWELVE MONTHS ENDED
   SEPTEMBER 30 SEPTEMBER 30
   2017 2016 2017 2016
CASH FLOW FROM OPERATING ACTIVITIES:

Net income
   $ 97,546 $ 87,361 $ 163,240 $ 154,059
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization
   189,089 217,764 260,457 286,977
Deferred income taxes
   49,409 43,702 74,439 86,526
Changes in current assets and liabilities:

Accounts receivable, net of allowances
   (15,330 ) 28,531 (13,765 ) (17,889 )
Accrued utility revenue
   42,100 41,700 (1,100 ) (800 )
Deferred purchased gas costs
   (79,127 ) 81,389 (114,658 ) 79,460
Accounts payable
   (26,771 ) (24,942 ) 19,866 10,445
Accrued taxes
   4,689 (7,055 ) 38,084 (11,033 )
Other current assets and liabilities
   43,044 12,022 3,590 22,034
Gains on sale
   (1,452 ) (4,117 ) (4,483 ) (4,200 )
Changes in undistributed stock compensation
   9,199 4,347 10,308 5,142
AFUDC
   (2,077 ) (1,893 ) (2,473 ) (2,890 )
Changes in other assets and deferred charges
   (14,470 ) 3,926 (1,436 ) 4,183
Changes in other liabilities and deferred credits
   3,395 (4,813 ) (10,239 ) 702


Net cash provided by operating activities
   299,244 477,922 421,830 612,716


CASH FLOW FROM INVESTING ACTIVITIES:

Construction expenditures and property additions
   (449,998 ) (404,388 ) (575,141 ) (555,819 )
Acquisition of businesses, net of cash acquired
   —   (17,000 ) —   (17,000 )
Changes in customer advances
   (1,951 ) 5,445 504 9,445
Miscellaneous inflows
   9,160 7,965 14,234 4,726


Net cash used in investing activities
   (442,789 ) (407,978 ) (560,403 ) (558,648 )


CASH FLOW FROM FINANCING ACTIVITIES:

Issuance of common stock, net
   11,563 530 11,505 507
Dividends paid
   (68,503 ) (61,950 ) (89,870 ) (81,138 )
Centuri distribution to redeemable noncontrolling interest
   (204 ) (99 ) (544 ) (198 )
Issuance of long-term debt, net
   104,308 408,946 119,308 420,946
Retirement of long-term debt
   (100,240 ) (196,351 ) (159,162 ) (240,999 )
Change in credit facility and commercial paper
   145,000 (150,000 ) 150,000 (97,000 )
Change in short-term debt
   110,500 (18,000 ) 110,500 —
Principal payments on capital lease obligations
   (796 ) (1,125 ) (1,025 ) (1,449 )
Redemption of Centuri shares from noncontrolling parties
   (23,000 ) —   (23,000 ) —
Withholding remittance—share-based compensation
   (3,176 ) (2,119 ) (3,176 ) (2,164 )
Other
   (1,104 ) (605 ) (2,068 ) (60 )


Net cash provided by (used in) financing activities
   174,348 (20,773 ) 112,468 (1,555 )


Effects of currency translation on cash and cash equivalents
   283 (14 ) 103 (318 )


Change in cash and cash equivalents
   31,086 49,157 (26,002 ) 52,195
Cash and cash equivalents at beginning of period
   28,066 35,997 85,154 32,959


Cash and cash equivalents at end of period
   $ 59,152 $ 85,154 $ 59,152 $ 85,154


Supplemental information:

Interest paid, net of amounts capitalized
   $ 45,771 $ 47,134 $ 66,077 $ 68,445
Income taxes paid (received)
   3,687 6,530 (21,875 ) 9,899



	Three Months Ended March 31,						Twelve Months Ended March 31,
	2019			2018			2019			2018
CASH FLOW FROM OPERATING ACTIVITIES:
Net income	$	95,384		$	78,294		$	198,742		$	203,231
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	77,539			62,478			264,273			240,951
Deferred income taxes	24,923			23,228			52,736			49,372
Changes in current assets and liabilities:
Accounts receivable, net of allowances	(15,562		)	8,858			(40,282		)	(68,978		)
Accrued utility revenue	30,200			30,900			300			(1,400		)
Deferred purchased gas costs	(67,863		)	(10,628		)	25,339			(36,330		)
Accounts payable	(12,643		)	(48,497		)	47,632			26,762
Accrued taxes	25,400			18,776			(5,331		)	491
Other current assets and liabilities	47,848			(643		)	(5,582		)	(29,945		)
Gains on sale	(233		)	(230		)	(1,706		)	(4,087		)
Changes in undistributed stock compensation	3,188			1,861			7,438			6,638
AFUDC	(960		)	(229		)	(4,358		)	(2,050		)
Changes in other assets and deferred charges	(16,328		)	(1,845		)	(20,221		)	(16,941		)
Changes in other liabilities and deferred credits	(2,782		)	18,244			17,420			20,965
Net cash provided by operating activities	188,111			180,567			536,400			388,679
CASH FLOW FROM INVESTING ACTIVITIES:
Construction expenditures and property additions	(210,662		)	(154,542		)	(822,034		)	(662,401		)
Acquisition of businesses, net of cash acquired	—			(4,209		)	(247,164		)	(98,413		)
Changes in customer advances	3,078			3,038			13,503			2,304
Miscellaneous inflows	262			1,505			3,200			13,429
Net cash used in investing activities	(207,322		)	(154,208		)	(1,052,495		)	(745,081		)
CASH FLOW FROM FINANCING ACTIVITIES:
Issuance of common stock, net	25,879			11,220			369,061			52,375
Dividends paid	(27,602		)	(23,839		)	(104,003		)	(94,572		)
Centuri distribution to redeemable noncontrolling interest	—			(102		)	—			(204		)
Issuance of long-term debt, net	29,666			335,382			259,456			716,165
Retirement of long-term debt	(31,160		)	(21,102		)	(247,816		)	(312,308		)
Change in credit facility and commercial paper	—			(111,000		)	111,000			24,000
Change in short-term debt	36,000			(192,000		)	165,500			22,500
Principal payments on finance lease obligations	(70		)	(165		)	(553		)	(946		)
Redemption of Centuri shares from noncontrolling parties	—			—			—			(23,000		)
Withholding remittance - share-based compensation	(1,838		)	(2,852		)	(2,096		)	(3,510		)
Other	(53		)	(337		)	(2,460		)	(2,498		)
Net cash provided by (used in) financing activities	30,822			(4,795		)	548,089			378,002
Effects of currency translation on cash and cash equivalents	65			(71		)	(72		)	114
Change in cash and cash equivalents	11,676			21,493			31,922			21,714
Cash and cash equivalents at beginning of period	85,361			43,622			65,115			43,401
Cash and cash equivalents at end of period	$	97,037		$	65,115		$	97,037		$	65,115
Supplemental information:
Interest paid, net of amounts capitalized	$	15,850		$	13,294		$	89,118		$	74,949
Income taxes paid (received)	$	454		$	4,418		$	(2,743	)	$	8,264

The accompanying notes are an integral part of these statements.



	6



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		~~September 30, 2017~~March 31, 2019

SOUTHWEST GAS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Thousands of dollars)

(Unaudited)

   SEPTEMBER 30, DECEMBER 31,
   2017 2016
ASSETS

Utility plant:

Gas plant
   $ 6,440,547 $ 6,193,564
Less: accumulated depreciation
   (2,218,796 ) (2,172,966 )
Acquisition adjustments, net
   81 196
Construction work in progress
   164,030 111,177


Net utility plant
   4,385,862 4,131,971


Other property and investments
   115,841 108,569


Current assets:

Cash and cash equivalents
   46,467 19,024
Accounts receivable, net of allowances
   68,028 111,845
Accrued utility revenue
   34,100 76,200
Income taxes receivable, net
   6,440 4,455
Deferred purchased gas costs
   6,230 2,608
Prepaids and other current assets
   118,587 126,363


Total current assets
   279,852 340,495


Noncurrent assets:

Goodwill
   10,095 10,095
Deferred charges and other assets
   393,942 410,625
Discontinued operations—construction services—assets
   —   579,371


Total noncurrent assets
   404,037 1,000,091


Total assets
   $ 5,185,592 $ 5,581,126


CAPITALIZATION AND LIABILITIES
Capitalization:

Common stock
   $ 49,112 $ 49,112
Additionalpaid-in capital
   917,581 897,346
Accumulated other comprehensive income (loss), net
   (42,299 ) (45,639 )
Retained earnings
   606,007 767,061


Total Southwest Gas Corporation equity
   1,530,401 1,667,880
Discontinued operations—construction servicesnon-owner equity
   —   15,983
Long-term debt, less current maturities
   1,520,790 1,375,080


Total capitalization
   3,051,191 3,058,943


Current liabilities:

Current maturities of long-term debt
   —   25,000
Short-term debt
   83,000 —
Accounts payable
   92,257 138,229
Customer deposits
   70,162 72,296
Accrued general taxes
   48,998 42,921
Accrued interest
   24,406 17,395
Deferred purchased gas costs
   14,971 90,476
Payable to parent
   2,560 —
Other current liabilities
   109,705 95,999


Total current liabilities
   446,059 482,316


Deferred income taxes and other credits:

Deferred income taxes and investment tax credits, net
   853,682 806,109
Accumulated removal costs
   312,000 308,000
Other deferred credits and other long-term liabilities
   522,660 545,143
Discontinued operations—construction services—liabilities
   —   380,615


Total deferred income taxes and other credits
   1,688,342 2,039,867


Total capitalization and liabilities
   $ 5,185,592 $ 5,581,126



	March 31, 2019			December 31, 2018
ASSETS
Utility plant:
Gas plant	$	7,268,255		$	7,134,239
Less: accumulated depreciation	(2,257,017		)	(2,234,029		)
Construction work in progress	204,370			193,028
Net utility plant	5,215,608			5,093,238
Other property and investments	123,783			116,146
Current assets:
Cash and cash equivalents	75,148			31,962
Accounts receivable, net of allowances	170,471			140,057
Accrued utility revenue	47,000			77,200
Income taxes receivable	10,602			13,444
Deferred purchased gas costs	65,242			4,928
Prepaid and other current assets	165,382			229,562
Total current assets	533,845			497,153
Noncurrent assets:
Goodwill	10,095			10,095
Deferred charges and other assets	423,495			424,952
Total noncurrent assets	433,590			435,047
Total assets	$	6,306,826		$	6,141,584
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock	$	49,112		$	49,112
Additional paid-in capital	1,089,002			1,065,242
Accumulated other comprehensive income (loss), net	(47,795		)	(49,049		)
Retained earnings	797,584			717,155
Total equity	1,887,903			1,782,460
Long-term debt, less current maturities	1,818,959			1,818,669
Total capitalization	3,706,862			3,601,129
Current liabilities:
Short-term debt	188,000			152,000
Accounts payable	148,309			184,982
Customer deposits	68,593			67,940
Accrued general taxes	69,423			43,560
Accrued interest	30,398			20,243
Deferred purchased gas costs	72,213			79,762
Payable to parent	1,038			472
Other current liabilities	100,556			94,136
Total current liabilities	678,530			643,095
Deferred income taxes and other credits:
Deferred income taxes and investment tax credits, net	517,124			490,458
Accumulated removal costs	385,000			383,000
Other deferred credits and other long-term liabilities	1,019,310			1,023,902
Total deferred income taxes and other credits	1,921,434			1,897,360
Total capitalization and liabilities	$	6,306,826		$	6,141,584

The accompanying notes are an integral part of these statements.



	7



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		~~September 30, 2017~~March 31, 2019

SOUTHWEST GAS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(~~In thousands)~~

Thousands of dollars)

(Unaudited)

   THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
   SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
   2017 2016 2017 2016 2017 2016
Continuing operations:

Gas operating revenues
   $ 213,059 $ 200,179 $ 935,823 $ 980,927 $ 1,276,308 $ 1,376,388


Operating expenses:

Net cost of gas sold
   45,539 39,056 261,839 324,072 334,888 460,836
Operations and maintenance
   102,215 102,438 313,395 301,979 413,140 400,222
Depreciation and amortization
   46,194 56,436 153,643 174,413 212,693 228,609
Taxes other than income taxes
   14,046 12,480 43,325 39,480 56,221 51,810


Total operating expenses
   207,994 210,410 772,202 839,944 1,016,942 1,141,477


Operating income (loss)
   5,065 (10,231 ) 163,621 140,983 259,366 234,911


Other income and (expenses):

Net interest deductions
   (17,421 ) (16,364 ) (51,622 ) (49,155 ) (69,464 ) (65,146 )
Other income (deductions)
   3,081 2,521 8,744 6,712 10,308 9,615


Total other income and (expenses)
   (14,340 ) (13,843 ) (42,878 ) (42,443 ) (59,156 ) (55,531 )


Income (loss) from continuing operations before income taxes
   (9,275 ) (24,074 ) 120,743 98,540 200,210 179,380
Income tax expense (benefit)
   (5,251 ) (11,669 ) 38,307 31,004 65,887 59,544


Income (loss) from continuing operations
   (4,024 ) (12,405 ) 82,436 67,536 134,323 119,836


Discontinued operations—construction services:

Income before income taxes
   —   24,020 —   31,867 21,649 54,934
Income tax expense
   —   8,708 —   12,042 7,842 20,711


Income
   —   15,312 —   19,825 13,807 34,223
Noncontrolling interests
   —   435 —   500 514 1,079


Income—discontinued operations
   —   14,877 —   19,325 13,293 33,144


Net income (loss)
   $ (4,024 ) $ 2,472 $ 82,436 $ 86,861 $ 147,616 $ 152,980



	Three Months Ended March 31,						Twelve Months Ended March 31,
	2019			2018			2019			2018
Gas operating revenues	$	520,677		$	494,313		$	1,384,092		$	1,334,019
Operating expenses:
Net cost of gas sold	192,604			185,732			426,260			393,898
Operations and maintenance	105,542			102,190			408,165			389,687
Depreciation and amortization	57,612			49,961			199,467			190,688
Taxes other than income taxes	16,206			15,257			60,847			58,421
Total operating expenses	371,964			353,140			1,094,739			1,032,694
Operating income	148,713			141,173			289,353			301,325
Other income and (expenses):
Net interest deductions	(23,099		)	(19,255		)	(85,584		)	(71,778		)
Other income (deductions)	5,946			(4,603		)	(6,691		)	(9,747		)
Total other income and (expenses)	(17,153		)	(23,858		)	(92,275		)	(81,525		)
Income from continuing operations before income taxes	131,560			117,315			197,078			219,800
Income tax expense	28,171			26,966			45,196			49,571
Net income	$	103,389		$	90,349		$	151,882		$	170,229

The accompanying notes are an integral part of these statements.



	8



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		~~September 30, 2017~~March 31, 2019

SOUTHWEST GAS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(~~In thousands)~~

Thousands of dollars)

(Unaudited)

   THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
   SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
   2017 2016 2017 2016 2017 2016
Continuing operations:

Net income (loss) from continuing operations
   $ (4,024 ) $ (12,405 ) $ 82,436 $ 67,536 $ 134,323 $ 119,836


Other comprehensive income (loss), net of tax

Defined benefit pension plans:

Net actuarial gain (loss)
   —   —   —   —   (14,118 ) (18,922 )
Amortization of prior service cost
   207 207 621 621 828 828
Amortization of net actuarial loss
   3,944 4,196 11,832 12,586 16,027 17,915
Regulatory adjustment
   (3,555 ) (3,796 ) (10,667 ) (11,388 ) (2,741 ) (404 )


Net defined benefit pension plans
   596 607 1,786 1,819 (4 ) (583 )


Forward-starting interest rate swaps:

Amounts reclassified into net income
   518 518 1,554 1,556 2,073 2,073


Net forward-starting interest rate swaps
   518 518 1,554 1,556 2,073 2,073


Total other comprehensive income, net of tax from continuing operations
   1,114 1,125 3,340 3,375 2,069 1,490


Comprehensive income (loss) from continuing operations
   (2,910 ) (11,280 ) 85,776 70,911 136,392 121,326


Discontinued operations—construction services:

Net income
   —   14,877 —   19,325 13,293 33,144
Foreign currency translation adjustments
   —   (238 ) —   614 (453 ) 233


Comprehensive income
   —   14,639 —   19,939 12,840 33,377
Comprehensive income (loss) attributable to noncontrolling interests
   —   (8 ) —   21 (16 ) 10


Comprehensive income attributable to discontinued operations—construction services
   —   14,647 —   19,918 12,856 33,367


Comprehensive income (loss)
   $ (2,910 ) $ 3,367 $ 85,776 $ 90,829 $ 149,248 $ 154,693



	Three Months Ended March 31,						Twelve Months Ended March 31,
	2019			2018			2019			2018
Net income	$	103,389		$	90,349		$	151,882		$	170,229
Other comprehensive income (loss), net of tax
Defined benefit pension plans:
Net actuarial gain (loss)	—			—			(15,524		)	(32,701		)
Amortization of prior service cost	241			254			1,002			875
Amortization of net actuarial loss	4,441			6,387			23,603			18,219
Regulatory adjustment	(4,063		)	(5,746		)	(4,574		)	10,400
Net defined benefit pension plans	619			895			4,507			(3,207		)
Forward-starting interest rate swaps (“FSIRS”):
Amounts reclassified into net income	635			635			2,541			2,190
Net forward-starting interest rate swaps	635			635			2,541			2,190
Total other comprehensive income (loss), net of tax	1,254			1,530			7,048			(1,017		)
Comprehensive income	$	104,643		$	91,879		$	158,930		$	169,212

The accompanying notes are an integral part of these statements.



	9



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		~~September 30, 2017~~March 31, 2019

SOUTHWEST GAS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Thousands of dollars)

(Unaudited)

   NINE MONTHS ENDED TWELVE MONTHS ENDED
   SEPTEMBER 30 SEPTEMBER 30
   2017 2016 2017 2016
CASH FLOW FROM OPERATING ACTIVITIES:

Net Income
   $ 82,436 $ 87,361 $ 148,130 $ 154,059
Income (loss) from discontinued operations
   —   19,825 13,807 34,223


Income from continuing operations
   82,436 67,536 134,323 119,836
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization
   153,643 174,413 212,693 228,609
Deferred income taxes
   44,621 39,953 72,627 76,837
Changes in current assets and liabilities:

Accounts receivable, net of allowances
   43,818 91,680 (7,131 ) 8,543
Accrued utility revenue
   42,100 41,700 (1,100 ) (800 )
Deferred purchased gas costs
   (79,127 ) 81,389 (114,658 ) 79,460
Accounts payable
   (45,972 ) (47,060 ) 17,271 1,467
Accrued taxes
   4,092 (5,660 ) 29,143 4,567
Other current assets and liabilities
   32,453 (819 ) (224 ) 9,135
Changes in undistributed stock compensation
   7,999 4,347 9,108 5,142
AFUDC
   (2,077 ) (1,893 ) (2,473 ) (2,890 )
Changes in other assets and deferred charges
   (14,861 ) 3,664 (1,914 ) 3,834
Changes in other liabilities and deferred credits
   2,883 (4,813 ) (10,751 ) 702


Net cash provided by operating activities
   272,008 444,437 336,914 534,442


CASH FLOW FROM INVESTING ACTIVITIES:

Construction expenditures and property additions
   (395,463 ) (337,921 ) (514,661 ) (485,665 )
Changes in customer advances
   (1,951 ) 5,445 504 9,445
Miscellaneous inflows
   2,407 2,464 2,925 3,506
Dividends received
   —   2,801 9,660 5,602


Net cash used in investing activities
   (395,007 ) (327,211 ) (501,572 ) (467,112 )


CASH FLOW FROM FINANCING ACTIVITIES:

Issuance of common stock, net
   —   530 (58 ) 507
Contributions from parent
   11,659 —   11,659 —
Dividends paid
   (60,497 ) (61,950 ) (81,864 ) (81,138 )
Issuance of long-term debt, net
   —   296,469 —   296,469
Retirement of long-term debt
   (25,000 ) (124,855 ) (25,000 ) (124,855 )
Change in credit facility and commercial paper
   145,000 (150,000 ) 150,000 (97,000 )
Change in short-term debt
   83,000 (18,000 ) 83,000 —
Withholding remittance—share-based compensation
   (3,176 ) (2,119 ) (3,176 ) (2,164 )
Other
   (544 ) (605 ) (1,508 ) (9 )


Net cash provided by (used in) financing activities
   150,442 (60,530 ) 133,053 (8,190 )


Net cash provided by discontinued operating activities
   —   33,485 57,680 78,274
Net cash used in discontinued investing activities
   —   (80,767 ) (11,049 ) (91,536 )
Net cash provided by (used in) discontinued financing activities
   —   39,757 (44,491 ) 6,635
Effects of currency translation on cash and cash equivalents
   —   (14 ) (180 ) (318 )


Change in cash and cash equivalents
   27,443 49,157 (29,645 ) 52,195
Change in cash and cash equivalents of discontinued operations included in discontinued operations construction services assets
   —   7,539 (1,960 ) 6,945


Change in cash and cash equivalents of continuing operations
   27,443 56,696 (31,605 ) 59,140
Cash and cash equivalents at beginning of period
   19,024 21,376 78,072 18,932


Cash and cash equivalents at end of period
   $ 46,467 $ 78,072 $ 46,467 $ 78,072


Supplemental information:

Interest paid, net of amounts capitalized
   $ 40,751 $ 42,804 $ 59,448 $ 63,031


Income taxes paid (received)
   $ 4 $ (3,055 ) $ (27,952 ) $ (16,600 )



	Three Months Ended March 31,						Twelve Months Ended March 31,
	2019			2018			2019			2018
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income	$	103,389		$	90,349		$	151,882		$	170,229
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	57,612			49,961			199,467			190,688
Deferred income taxes	26,270			18,676			50,593			46,622
Changes in current assets and liabilities:
Accounts receivable, net of allowances	(30,414		)	(28,201		)	(22,522		)	(29,031		)
Accrued utility revenue	30,200			30,900			300			(1,400		)
Deferred purchased gas costs	(67,863		)	(10,628		)	25,339			(36,330		)
Accounts payable	(39,574		)	(34,564		)	18,398			14,717
Accrued taxes	28,704			27,476			(17,504		)	12,683
Other current assets and liabilities	81,625			3,163			(12,982		)	(47,905		)
Changes in undistributed stock compensation	2,597			2,118			5,834			5,695
AFUDC	(960		)	(229		)	(4,358		)	(2,050		)
Changes in other assets and deferred charges	(18,238		)	(1,998		)	(23,289		)	(17,655		)
Changes in other liabilities and deferred credits	(2,977		)	17,887			16,805			20,230
Net cash provided by operating activities	170,371			164,910			387,963			326,493
CASH FLOW FROM INVESTING ACTIVITIES:
Construction expenditures and property additions	(163,636		)	(131,743		)	(714,762		)	(591,184		)
Changes in customer advances	3,078			3,038			13,503			2,304
Miscellaneous inflows (outflows)	(78		)	293			(357		)	2,250
Net cash used in investing activities	(160,636		)	(128,412		)	(701,616		)	(586,630		)
CASH FLOW FROM FINANCING ACTIVITIES:
Issuance of common stock, net	—			—			—			41,359
Contributions from parent	22,842			—			136,391			—
Dividends paid	(23,500		)	(21,000		)	(89,500		)	(83,997		)
Issuance of long-term debt, net	—			297,495			—			297,495
Change in credit facility and commercial paper	—			(111,000		)	111,000			24,000
Change in short-term debt	36,000			(191,000		)	188,000			—
Withholding remittance - share-based compensation	(1,838		)	(2,852		)	(2,096		)	(3,510		)
Other	(53		)	(298		)	(783		)	(371		)
Net cash provided by (used in) financing activities	33,451			(28,655		)	343,012			274,976

Change in cash and cash equivalents	43,186			7,843			29,359			14,839
Cash and cash equivalents at beginning of period	31,962			37,946			45,789			30,950
Cash and cash equivalents at end of period	$	75,148		$	45,789		$	75,148		$	45,789
Supplemental information:
Interest paid, net of amounts capitalized	$	11,585		$	10,296		$	75,094		$	66,097
Income taxes paid (received)	$	(22	)	$	—		$	(5,878	)	$	(7,816	)

The accompanying notes are an integral part of these statements.



	10



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		~~September 30, 2017~~March 31, 2019

Note 1 – ~~Nature~~Background, Organization, and Summary of ~~Operations and Basis of Presentation~~

Significant Accounting Policies

Nature of Operations. Southwest Gas Holdings, Inc. is a holding company, owning all of the shares of common stock of Southwest Gas Corporation (“Southwest” or the “natural gas operations segment”) and ~~prior to August 2017, 96.6%~~all of the shares of common stock of Centuri ~~Construction~~ Group, Inc. ~~During August 2017, Southwest Gas Holdings, Inc. acquired~~(“Centuri,” or the ~~remaining 3.4% equity interest in Centuri Construction Group, Inc. that was held by~~“utility infrastructure services” segment). At the ~~previous owners (and was previously reflected as a redeemable noncontrolling interest). Refer to~~ ~~Note 9 – Construction Services Redeemable Noncontrolling Interest~~~~for additional information.~~

In January 2017, a previously contemplated and approved reorganization under a holding company structure was made effective. The reorganization was designed to provide further separation between regulated and unregulated businesses, and to provide additional financing flexibility. Coincident with the effective dateannual meeting of ~~the reorganization, existing shareholders of Southwest Gas Corporation became~~ shareholders of Southwest Gas Holdings, Inc., held on a~~one-for-one~~ ~~basis, with~~May 2, 2019, shareholders voted to approve changing the ~~same number~~state of ~~shares and same ownership percentage as they held immediately prior to the reorganization. At the same time,~~incorporation for Southwest Gas ~~Corporation and Centuri Construction Group,~~Holdings, Inc. ~~(“Centuri”~~from California to Delaware. The reincorporation is expected to be effective during the second or third quarter of 2019. However, the ~~“construction services” segment) each became subsidiaries of the publicly traded holding company; whereas, historically, Centuri had been a direct subsidiary of~~ reincorporation remains subject to certain regulatory approvals, which are currently pending.

Southwest ~~Gas Corporation.~~

~~Southwest Gas Corporation (“Southwest” or the “natural gas operations segment”)~~ is engaged in the business of purchasing, distributing, and transporting natural gas for customers in portions of Arizona, Nevada, and California. Public utility rates, practices, facilities, and service territories of Southwest are subject to regulatory oversight. The timing and amount of rate relief can materially impact results of operations. Natural gas purchases and the timing of related recoveries can materially impact liquidity. Results for the natural gas operations segment are higher during winter periods due to the seasonality incorporated in its regulatory rate structures.

Centuri is a comprehensive ~~construction~~utility infrastructure services enterprise dedicated to ~~meeting the growing demands~~delivering a diverse array of solutions to North ~~American utilities, energy~~America’s gas and ~~industrial markets.~~electric providers. Centuri derives revenue from installation, replacement, repair, and maintenance of energy distribution systems, and developing industrial construction solutions. Centuri operations are generally conducted under the business names of NPL Construction Co. (“NPL”), NPL Canada Ltd. (“NPL Canada”~~, formerly Link-Line Contractors Ltd.~~), ~~W.S. Nicholls Construction,~~New England Utility Constructors, Inc. (“~~W.S. Nicholls”~~Neuco”), and ~~Brigadier Pipelines Inc.~~Linetec Services, LLC (“~~Brigadier”~~Linetec”). ~~Typically, Centuri revenues~~Utility infrastructure services activity is seasonal in most of Centuri’s operating areas. Peak periods are ~~lowest during the first quarter of the year due to unfavorable winter weather conditions. Operating revenues typically improve as more favorable weather conditions occur during~~ the summer and fall ~~months.~~

months in colder climate areas, such as the northeastern and midwestern United States (“U.S”) and in Canada. In warmer climate areas, such as the southwestern and southeastern U.S., utility infrastructure services activity continues year round. In November 2017, Centuri acquired Neuco, thereby expanding its core services in the northeast region of the U.S. Additionally, in November 2018, Centuri expanded its operations in the southeast region of the U.S. through the acquisition of an 80% interest in Linetec. See Note 12 – Business Acquisitions for more information.

Basis of Presentation. The condensed consolidated financial statements for Southwest Gas Holdings, Inc. and subsidiaries (the “Company”) and Southwest included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The year-end condensed balance sheet data was derived from audited financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with ~~United States~~U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. As indicated above, in connection with the holding company reorganization, Centuri ceased to be a subsidiary of Southwest and became a subsidiary of Southwest Gas Holdings, Inc. To give effect to this change, the separate condensed consolidated financial statements related to Southwest Gas Corporation, which are included in this~~Form 10-Q,~~ depict Centuri-related amounts for periods prior to January 1, 2017 as discontinued operations. Because the transfer of Centuri from Southwest Gas Corporation to Southwest Gas Holdings, Inc. was effectuated as an equity transaction and not a sale, assets and liabilities subject to the discontinued operations presentation have been reflected as noncurrent on the Southwest Gas Corporation Condensed Consolidated Balance Sheet. Those assets and liabilities are detailed in~~Note~~ ~~10 – Reorganization Impacts – Discontinued Operations Solely Related to Southwest Gas Corporation~~~~,and include both current andnon-current~~ ~~amounts.~~

No substantive change has occurred with regard to the Company’s business segments on the whole, or in the primary businesses comprising those segments as a result of the foregoing ~~organizational changes. Centuri operations continue to be part~~acquisitions of ~~continuing operations~~Neuco and ~~included in the consolidated financial statements of Southwest Gas Holdings, Inc.~~

Linetec.

The preparation of the condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.


~~SOUTHWEST GAS HOLDINGS, INC.~~		~~Form 10-Q~~
~~SOUTHWEST GAS CORPORATION~~		~~September 30, 2017~~

Actual results could differ from those estimates. In the opinion of management, all adjustments, consisting of normal recurring items and estimates necessary for a fair statement of results for the interim periods, have been made. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the ~~2016~~2018 Annual Report to Shareholders, which is incorporated by reference into the ~~2016~~2018 Form 10-K.

~~Prepaids~~

Fair Value Measurements. Certain assets and liabilities are reported at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

U.S. GAAP states that a fair value measurement should be based on the assumptions that market participants would use in pricing the asset or liability and establishes a fair value hierarchy that ranks the inputs used to measure fair value by their reliability. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to fair values derived from unobservable inputs (Level 3 measurements). Financial assets and liabilities are categorized in their entirety based on the lowest level of input that is significant to the fair value measurement. The three levels of the fair value hierarchy are as follows:

Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities that a company has the ability to access at the measurement date.

Level 2 – inputs other than quoted prices included within Level 1 that are observable for similar assets or liabilities, either directly or indirectly.

Level 3 – unobservable inputs for the asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.



	11



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		March 31, 2019

The Company primarily used quoted market prices and other ~~current assets.~~ ~~Prepaids~~observable market pricing information in valuing cash and ~~other current~~cash equivalents, derivatives, long-term debt outstanding, and assets of the qualified pension plan and postretirement benefit plans required to be disclosed at fair value.

Other Property and Investments. Other property and investments on the Condensed Consolidated Balance Sheets includes ~~gas pipe materials and operating supplies~~(thousands of $36 million at September 30, 2017 and $30 million at December 31, 2016 (carried at weighted average cost) and $24 million at September 30, 2017 and $953,000 at December 31, 2016 related to a regulatory asset associated with the Arizona decoupling mechanism (an alternative revenue program).

~~Other current liabilities~~~~. Other current liabilities of Southwest Gas Corporation include $21 million of dividends declared but not yet paid to Southwest Gas Holdings, Inc. at September 30, 2017.~~

dollars):

March 31, 2019 December 31, 2018
Southwest Gas Corporation:
Net cash surrender value of COLI policies $ 122,048
$ 114,405
Other property 1,735
1,741
Total Southwest Gas Corporation 123,783
116,146
Centuri property, equipment, and intangibles 894,739
792,191
Centuri accumulated depreciation/amortization (316,832 ) (298,939 )
Other property 15,032
14,153
Total Southwest Gas Holdings, Inc. $ 716,722
$ 623,551

Cash and Cash Equivalents. For purposes of reporting consolidated cash flows, cash and cash equivalents include cash on hand and financial instruments with ~~a purchase-date maturity~~maturities of three months or less. ~~In general, cash~~Such investments are carried at cost, which approximates market value. Cash and cash equivalents ~~fall within Level 1 (quoted prices~~ for ~~identical financial instruments) of~~Southwest and the ~~three-level fair value hierarchy that ranks the inputs, used to measure fair value, by their reliability. However, cash and cash equivalents at September 30, 2017 and December 31, 2016~~Company also ~~includes~~include money market fund investments oftotaling approximately ~~$19.8~~$41 million and ~~$5.3~~$54.4 million, respectively, at March 31, 2019, and $18 million and $59.9 million, respectively, at December 31, 2018, which fall within Level 2 ~~(significant other observable inputs)~~ of the fair value hierarchy, due to the asset valuation methods used by money market funds.

~~Significant~~

Typical non-cash investing ~~and financing~~ activities ~~included the following: Upon contract expiration,~~for Southwest include customer advances ~~of approximately $1.9 million and $3.6 million, during the first nine months of 2017 and 2016, respectively, were~~ applied as contributions toward utility construction activity and ~~representnon-cash~~capital expenditures that were not paid as of quarter end that are included in accounts payable. Amounts related to such activities were immaterial for the periods presented herein. Non-cash investing ~~activity.~~

~~Adoption~~activities for the three months and twelve months ended March 31, 2019 included $73.5 million of purchase consideration related to the Linetec acquisition by Centuri, in the form of liabilities incurred that remained unpaid as of March 31, 2019; such amounts are included in Other current liabilities on the Condensed Consolidated Balance Sheets of the Company. Also, see Recent Accounting Standards ~~Update (“ASU”) No.~~ ~~2016-09.~~ ~~As of January 1, 2017, the Company adopted Financial Accounting Standards Board (“FASB”) ASUNo. 2016-09~~ ~~“Compensation—Stock Compensation (Topic 718): Improvements~~Updates and Note 4 – Leases for information related to ~~Employee Share-Based Payment Accounting.” The adoption of this update is considered a change~~right-of-use assets obtained in ~~accounting principle. Among other things, the update clarifies that all cash payments made to taxing authorities on the employees’ behalf~~exchange for ~~withheld shares should be presented as~~lease liabilities, which are non-cash investing and financing ~~activities on the statement of cash flows. This change is required to be~~activities.

Intercompany Transactions. Centuri recognizes revenues generated from contracts with Southwest (see Note 10 – Segment Information). Centuri’s accounts receivable for these services are presented in the ~~cash flow statement retrospectively. A new category, Withholding remittance – share-based compensation has been added to the Cash Flow from Financing Activities section~~table below (thousands of ~~the Condensed Consolidated Statements of Cash Flows for both Southwest Gas Holdings, Inc.~~dollars):



	March 31, 2019		December 31, 2018
Centuri accounts receivable for services provided to Southwest	$	16,837	$	18,830

The accounts receivable balance, revenues, and ~~Southwest Gas Corporation. The withheld taxes were~~associated profits are included in the condensed consolidated financial statements of the Company and Southwest and were not eliminated during consolidation in accordance with accounting treatment for rate-regulated entities.

Income Taxes. In 2017, the Tax Cuts and Jobs Act (the “TCJA”) was enacted. The TCJA had significant impacts on the taxation of business entities, including specific provisions related to regulated public utilities. The more significant changes that impacted the Company and Southwest include the reduction in the corporate federal income tax rate from 35% to 21%, and limiting the utilization of net operating losses (“NOLs”) to 80% of taxable income, with the ability to indefinitely carryforward unutilized NOLs to reduce future taxable income.

Prepaid and Other Current Assets. Prepaid and other current assets includes gas pipe materials and ~~liabilities line item~~operating supplies of ~~the Condensed Consolidated Statements of Cash Flows in previous periods. Therefore, upon adoption, amounts presented~~$55 million at March 31, 2019 and $56 million at December 31, 2018 (carried at weighted average cost), as ~~cash inflows from Other current assets~~well as $55 million at March 31, 2019 and ~~liabilities under the Cash Flow from Operating Activities section of the Southwest Gas Holdings, Inc. Condensed Consolidated Statements of Cash Flows were revised from $9.9~~$74 million to $12 million for the nine months ended September 30, 2016 and inflows in the same category for the twelve months ended September 30, 2016 were revised from $19.9 million to $22 million. In addition, while standalone financial statements were not previously presented for natural gas operations, for reasonsat December 31, 2018 related to a regulatory asset associated with the holding company reorganization discussed above, they are now presented. Therefore, upon adoption of this standard, the Cash Flow from Operating Activities section of the Southwest Gas Corporation Condensed Consolidated Statements of Cash Flows reflects a reclassification of cash outflows from Other current assets and liabilities from $2.9 million to $819,000 for the nine months ended September 30, 2016 and cash inflows in the same category were revised from $7 million to $9.1 million for the twelve months ended September 30, 2016.

Under the new guidance, the Company can withhold any amount between the minimum and maximum individual statutory tax rates and still treat the entire award as equity. The Company intends to administer withholding such that awards under stock compensation programs will continue to be treated as equity awards.

~~In addition to the above, the update requires all incometax-related~~ cash flows resulting from share-based payments (unrelated to employee withholding) be reported as operating activities on the statement of cash flows, a change from the previous requirement to present windfall tax benefits as an inflow from financing activities and an outflow from operating activities. The Company chose to apply this presentation requirement of the update prospectively as permitted. Therefore, prior periods were not impacted in implementing this provision of the update.


~~SOUTHWEST GAS HOLDINGS, INC.~~		~~Form 10-Q~~
~~SOUTHWEST GAS CORPORATION~~		~~September 30, 2017~~

Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value are required to be applied using a modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted. The Company had no previously unrecognized tax benefits as a result of these changes; therefore, no cumulative effect adjustment to the Company’s opening retained earnings was required.

Arizona decoupling mechanism (an alternative revenue program).

Goodwill. Goodwill is assessed as of October 1steach year for impairment, ~~(required annually by U.S. GAAP),~~ or ~~otherwise,~~more frequently, if circumstances indicate an impairment to the carrying value of goodwill may have occurred. ~~In consideration~~Management of the ~~holding company reorganization, management of the~~ Company and Southwest considered its reporting units and segments and determined that ~~historic judgments regarding~~ its segments and reporting units ~~continue to apply,~~remain consistent between periods presented below, and that no change was necessary with regard to the level at which goodwill is assessed for impairment. No impairment was deemed to have occurred in the first ~~nine~~three months of ~~2017.~~

(In thousands of dollars)    Natural Gas
Operations    Construction
Services    Consolidated
December 31, 2016
   $ 10,095    $ 129,888    $ 139,983
Foreign currency translation adjustment
   —      7,882    7,882






September 30, 2017
   $ 10,095    $ 137,770    $ 147,865

~~Intercompany Transactions~~~~. Centuri recognizes revenues generated from contracts with Southwest (see~~~~Note 3—~~~~Segment Information~~~~). Centuri’s accounts receivable for these services are presented in the table below (thousands of dollars):~~

   September 30, 2017    December 31, 2016
Centuri accounts receivable for services provided to Southwest
   $ 11,486    $ 10,585

The accounts receivable balance, revenues, and associated profits are included in the condensed consolidated financial statements of the Company and were not eliminated during consolidation in accordance with accounting treatment for rate-regulated entities.

~~Other Property and Investments.~~~~Other property and investments on the Southwest Gas Holdings, Inc. Condensed Consolidated Balance Sheets includes (thousands of dollars):~~

   September 30, 2017    December 31, 2016
Centuri property and equipment
   $ 493,599    $ 451,114
Centuri accumulated provision for depreciation and amortization
   (251,831 )    (228,374 )
Net cash surrender value of COLI policies
   114,052    106,744
Other property
   13,483    12,859




Total
   $ 369,303    $ 342,343

2019.



	12



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		~~September 30, 2017~~March 31, 2019

(Thousands of dollars)
Natural Gas
Operations

Utility Infrastructure
Services
Total Company
December 31, 2018 $ 10,095
$ 348,950
$ 359,045
Measurement Period Adjustment - Linetec acquisition —
3,303
3,303
Foreign currency translation adjustment —
2,134
2,134
March 31, 2019 $ 10,095
$ 354,387
$ 364,482

Other Current Liabilities. Other current liabilities for Southwest include $22.8 million of dividends declared by Southwest Gas Corporation, but not yet paid to Southwest Gas Holdings, Inc. at March 31, 2019.

Other Income (Deductions).The following table provides the composition of significant items included in Other income (deductions) in the ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~income~~Income (thousands of dollars):

   Three Months Ended Nine Months Ended Twelve Months Ended
   September 30 September 30 September 30
   2017 2016 2017 2016 2017 2016
Southwest Gas Corporation—natural gas operations segment:

Change in COLI policies
   $ 2,100 $ 2,300 $ 6,800 $ 5,400 $ 8,800 $ 7,500
Interest income
   670 522 1,848 1,279 2,417 1,664
Equity AFUDC
   968 611 2,077 1,893 2,473 2,890
Miscellaneous income and (expense)
   (657 ) (912 ) (1,981 ) (1,860 ) (3,382 ) (2,439 )


Southwest Gas Corporation—total other income (deductions)
   3,081 2,521 8,744 6,712 10,308 9,615


Construction services segment:

Interest income
   1 —   2 1 2 414
Foreign transaction gain (loss)
   (442 ) (3 ) (640 ) (22 ) (640 ) 28
Miscellaneous income and (expense)
   231 47 676 65 1,825 804


Centuri—total other income (deductions)
   (210 ) 44 38 44 1,187 1,246


Corporate and administrative
   5 —   6 —   6 —


Consolidated Southwest Gas Holdings, Inc.—total other income (deductions)
   $ 2,876 $ 2,565 $ 8,788 $ 6,756 $ 11,501 $ 10,861



	Three Months Ended						Twelve Months Ended
	March 31,						March 31,
	2019			2018			2019			2018
Southwest Gas Corporation - natural gas operations segment:
Change in COLI policies	$	7,600		$	(700	)	$	5,100		$	6,800
Interest income	1,597			1,418			6,199			3,638
Equity AFUDC	960			229			4,358			2,049
Other components of net periodic benefit cost	(3,765		)	(5,265		)	(19,560		)	(19,834		)
Miscellaneous income and (expense)	(446		)	(285		)	(2,788		)	(2,400		)
Southwest Gas Corporation - total other income (deductions)	5,946			(4,603		)	(6,691		)	(9,747		)
Utility infrastructure services segment:
Interest income	—			1			87			4
Foreign transaction gain (loss)	531			147			162			(606		)
Miscellaneous income and (expense)	344			115			125			956
Centuri - total other income (deductions)	875			263			374			354
Corporate and administrative	18			6			64			19
Consolidated Southwest Gas Holdings, Inc. - total other income (deductions)	$	6,839		$	(4,334	)	$	(6,253	)	$	(9,374	)

Included in the table above is the change in cash surrender values of company-owned life insurance (“COLI”) policies (including net death benefits recognized). These life insurance policies on members of management and other key employees are used by Southwest to indemnify itself against the loss of talent, expertise, and knowledge, as well as to provide indirect funding for certain nonqualified benefit plans. Current tax regulations provide fortax-free treatment of life insurance (death benefit) proceeds. Therefore, changes in the cash surrender values of COLI policies, as they progress towards the ultimate death benefits, are also recorded without tax consequences.

~~Recently Issued~~ Refer also to Note 2 – Components of Net Periodic Benefit Cost.

Recent Accounting Standards Updates. In May 2014, the FASB issued the update “Revenue from Contracts with Customers (Topic 606).” The update replaces much of the current guidance regarding revenue recognition including most industry-specific guidance. In accordance with the update, an entity will be required to identify the contract with the customer, identify the performance obligations

Accounting pronouncements adopted in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue when (or as) the entity satisfies a performance obligation. In addition to the new revenue recognition requirements, entities will be required to disclose sufficient information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Entities may choose between two retrospective transition methods when applying the update. In July 2015, the FASB approved a~~one-year~~ deferral of the effective date (annual periods beginning after December 15, 2017). In March, April, May, and December of 2016, the FASB issued updates to Topic 606 related to “Principal versus Agent Considerations (Reporting Revenue Gross versus Net)”, “Identifying Performance Obligations and Licensing,” “Narrow-Scope Improvements and Practical Expedients”, and certain “Technical Corrections and Improvements.” The amendments in the first two updates, respectively, provide guidance when another party, along with the entity, is involved in providing a good or service to a customer, and provide clarification with regard to identifying performance obligations and of the licensing implementation guidance in Topic 606. The third update includes improvements to the guidance on collectibility, noncash consideration, and completed contracts at transition. In addition, a practical expedient is provided for contract modifications at transition and an accounting policy election related to the presentation of sales taxes and other similar taxes collected from customers. The fourth update affects narrow aspects of the guidance as issued to date. Management plans to adopt all of these updates at the required adoption date, which is for interim and annual reporting periods commencing January 2018.

Deliberations have been ongoing by the utility industry, notably in connection with efforts to produce an accounting guide intended to be developed by the American Institute of Certified Public Accountants (“AICPA”). In association with this undertaking, the AICPA formed a number of industry task forces, including a Power & Utilities (“P&U”) Task Force, on which Company personnel actively participate via formal membership. Industry representatives and organizations, the largest auditing firms, the AICPA’s Revenue Recognition Working Group and its Financial Reporting Executive Committee have undertaken, and continue to undertake, consideration of several items relevant to the utility industry. Where applicable or necessary, the FASB’s Transition Resource Group (“TRG”) has also participated. Through the P&U Task Force undertakings, general determinations were made that contributions received in aid of construction (“CIAC”) efforts related to the industry’s pipe distribution and transmission systems are reimbursements of expenditures rather than revenue (consistent with current accounting practices). Furthermore, regarding the “collectibility” criterion in the update that must be met for revenue recognition, general determinations have been made that contracts for utility service (including service to lower income or lower credit quality customers)


~~SOUTHWEST GAS HOLDINGS, INC.~~		~~Form 10-Q~~
~~SOUTHWEST GAS CORPORATION~~		~~September 30, 2017~~

represent genuine and valid contracts for which revenue is able to be recognized when service is rendered (consistent with current accounting practices). These determinations by the P&U industry are based on the various measures the industry takes to help ensure collectibility (e.g., proof of creditworthiness, customer deposits, late fee assessment, disconnection, service~~re-establishment~~ fees, collection processes, etc.), in addition to the regulatory mechanisms established under rate regulation to mitigate the impacts of individual customer nonpayment. Southwest has also actively worked with its peers in the rate-regulated natural gas industry and with the public accounting profession to finalize the accounting treatment for several other issues not separately addressed by the P&U Task Force.

With regard to the construction services segment, the principles of the new revenue recognition guidance are very similar to existing guidance for construction contractors. Similar to the P&U Task Force noted above, the AICPA formed the Engineering and Construction Contractors Task Force to assist the construction industry with implementing the new guidance. The accounting guide the AICPA intends to release is expected to provide implementation guidance related to several issues including 1) combining contracts and separating performance obligations; 2) estimating change orders, incentives, penalties, liquidated damages and other variable consideration items and 3) acceptable measures of progress when recognizing revenue over time.

Management of both segments of the Company has substantially completed assessments of sources of revenue and the effects that adoption of the new guidance will have on the Company’s (and Southwest’s in the case of utility operations) financial position, results of operations, and cash flows. Based on assessments completed to date, management believes that such impacts will not be material overall. Presentation and disclosure requirements of the new guidance will have the most impact on the Company’s financial statements and note disclosures. The Company is currently planning to adopt the new guidance in 2018 under the modified retrospective transition method, as permissible.

~~In January 2016, the FASB issued the update “Financial Instruments – Overall (Subtopic825-10):~~ Recognition and Measurement of Financial Assets and Financial Liabilities” in order to improve the recognition and measurement of financial instruments. The update makes targeted improvements to existing U.S. GAAP by: 1) requiring equity investments to be measured at fair value with changes in fair value recognized in net income; 2) requiring the use of the exit price notion when measuring the fair value of financial instruments for disclosure purposes; 3) requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements; 4) eliminating the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; and 5) requiring a reporting entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in instrument-specific credit risk when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. All entities can early adopt the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. Management believes this update will not have a material impact on its consolidated financial statements and disclosures.

2019:

In February 2016, the FASB issued the update “Leases (Topic 842).” Under the update, lessees ~~will be~~were required to recognize ~~the following for all leases (with the exception of short-term leases) at the commencement date:~~

Aa lease liability ~~which is a lessee’s~~for the obligation to make lease payments, ~~arising from a lease,~~ measured on a discounted basis; and

A a right-of-use asset ~~which is an asset that represents~~for the ~~lessee’s~~ right to use, or control the use of, a specified asset for the lease term.

~~Under~~ The Company and Southwest adopted Topic 842 in the ~~new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with~~first quarter of 2019 through an optional transition method, which was elected, permitting the lessee accounting model and Topic 606, Revenue from Contracts with Customers. Though companies have historically been required to make disclosures regarding leases and of associated contractual obligations, leases (with terms longer than a year) will no longer exist~~off-balance~~ sheet. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginningapplication of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply


~~SOUTHWEST GAS HOLDINGS, INC.~~		~~Form 10-Q~~
~~SOUTHWEST GAS CORPORATION~~		~~September 30, 2017~~

a full retrospective transition approach. Early application is permitted. Management currently plans to adopt the update at the required adoption date, which is for interim and annual reporting periods commencing January 1, 2019. Existing leases have been historically documented under traditional leasing arrangements by both segments. Management is in the process of evaluating other types of arrangements that have the potential to meet the definition of a lease under the new standard, and is also in the process of selecting software to efficiently implement the standard for its natural gas operations segment. The FASB recently issued proposed guidance that will allow the election of a practical expedient to not apply the new standard to existing easement contracts that were not previously assessed as leases under historic guidance. However, the Company would still be required to evaluate any new easements entered into after the effective dateprovisions of the standard at the adoption date, rather than to ~~determine if~~earlier comparative periods. As a result, the ~~arrangements should~~Company and Southwest have not recast prior periods to reflect the adoption of this standard. See Note 4 – Leases.

Accounting pronouncements that will be accounted for as leases. Management is currently evaluating the new and proposed guidance in light of its customary leasing arrangements (and other arrangements in association with the new guidance) to determine the effect the new standard will have on its financial position, results of operations, cash flows, and business processes.

effective after 2019:

In June 2016, the FASB issued ~~the~~ASU 2016-13 update “Financial ~~Instruments—~~Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The update ~~amends guidance on reporting~~requires the measurement of all expected credit losses for financial assets held at ~~amortized cost basis~~the reporting date based on historical experience, current conditions, and ~~available for sale debt securities. For assets held at amortized cost basis, the update eliminates the “probable” threshold for initial recognition of~~reasonable and supportable forecasts. The inputs currently used to estimate credit losses ~~in current U.S. GAAP and, instead, requires an entity~~will still be used; however, they may be adapted to reflect ~~its current estimate~~the full amount of ~~all~~ expected ~~credit~~ losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset to present the net amount expected to be collected. For available for sale debt securities, credit losses should be measured in a manner similar to current U.S. GAAP, however the update will require that credit losses be presented as an allowance rather than as a write-down. This update affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The update affects loans, debt securities, trade receivables, net investments in leases,~~off-balance~~ ~~sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash.~~ The update is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. All entities may adopt the amendments in this update earlier as of fiscal years beginning after December 15, 2018, including interim



	13



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		March 31, 2019

periods within those fiscal years. Management is evaluating what impact, if any, this update might have on ~~its~~the Company’s and Southwest’s consolidated financial statements and disclosures.

In August 2016, the FASB issued the update “Classification of Certain Cash Receipts and Cash Payments.” This update addresses the following specific cash flow issues: debt prepayment or debt extinguishment costs; settlement of~~zero-coupon~~ debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance (“COLI”) policies; distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows, including identification of the predominant nature in cases where cash receipts and payments have aspects of more than one class of cash flows. The update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. Management believes this update will not have a material impact on its consolidated cash flow statements and disclosures.

In October 2016, the FASB issued the update “Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory.” This update eliminates the current U.S. GAAP exception for all intra-entity sales of assets other than inventory. As a result, a reporting entity would recognize the tax expense from the sale of the asset in the seller’s tax jurisdiction when the transfer occurs, even though the~~pre-tax~~ effects of that transaction are eliminated in consolidation. Any deferred tax asset that arises in the buyer’s jurisdiction would also be recognized at the time of the transfer. The update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted; however, the guidance can only be adopted in the first interim period of a fiscal year. No such election to adopt early was made by management. The modified retrospective approach will be required for transition to the new guidance, with a cumulative-effect adjustment recorded in retained earnings as of the beginning of the period of adoption. Management believes this update will not have a material impact on its consolidated financial statements and disclosures.

In January 2017, the FASB issued ~~the update “Intangibles—~~ASU 2017-04 “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” ~~The update eliminates~~Currently, unless meeting the criteria for qualitative assessment only, an entity is required to perform a two-step test to determine the amount, if any, of goodwill impairment. In Step ~~2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing~~1, an entity compares the fair value of a reporting unit with its carrying ~~amount.~~amount, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, the entity performs Step 2 and compares the implied fair value of goodwill with the carrying amount of that goodwill for that reporting unit, requiring a hypothetical purchase price allocation to measure the amount of a goodwill impairment. An impairment charge ~~should be recognized for~~equal to the amount by which the carrying amount of goodwill for the reporting unit exceeds the implied fair value of that goodwill is recorded, limited to the amount of goodwill allocated to that reporting ~~unit’s~~


~~SOUTHWEST GAS HOLDINGS, INC.~~		~~Form 10-Q~~
~~SOUTHWEST GAS CORPORATION~~		~~September 30, 2017~~

unit. Under the update, an entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair ~~value; however, the loss recognized should~~value, not to exceed the total amount of goodwill allocated to ~~that~~the reporting unit. ~~In addition, income tax effects~~The new guidance does not amend the optional qualitative assessment. The amount of any goodwill impairment calculated under the update could vary from ~~anytax-deductible~~ ~~goodwill on~~ the calculation under existing guidance, largely due to the consideration to be given to unrecognized differences between the fair value and carrying ~~amount~~values of the other assets and liabilities in the reporting unit ~~should be considered when measuring~~under the goodwill impairment loss, if applicable. The update also eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary.new guidance. The amendments should be applied on a prospective basis. The update is effective for fiscal and interim periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. Management ~~has determined that~~is evaluating the impacts this update ~~would~~might have ~~had no impact~~ on the Company’s and Southwest’s consolidated financial statements ~~for the periods presented if it had been effective during those periods.~~

and disclosures.

In ~~March 2017,~~August 2018, the FASB issued ASU 2018-15 “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” The update generally aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement (that is a service contract) with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The update ~~“Compensation –~~ also requires the entity to expense the capitalized implementation costs of such hosting arrangements over the term of the hosting arrangement, including reasonably certain renewal periods. The update is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption of the amendments in this update is permitted for interim and related annual fiscal periods after December 15, 2018. Management is evaluating the impacts this update might have on the Company’s and Southwest’s consolidated financial statements and disclosures.

In August 2018, the FASB issued ASU 2018-14 “Compensation—Retirement ~~Benefits (Topic 715)~~Benefits—Defined Benefit Plans—General (Subtopic 715-20): ~~Improving~~Disclosure Framework—Changes to the ~~Presentation~~Disclosure Requirements for Defined Benefit Plans.” This update removes disclosures that are no longer considered cost-beneficial, clarifies the specific requirements of ~~Net Periodic Pension Cost~~disclosures, and ~~Net Periodic Postretirement Benefit Cost.”~~adds disclosure requirements identified as relevant. The update applies to all employers that ~~offer employee benefits under~~sponsor defined benefit pension ~~plans,~~or other postretirement ~~benefit plans, or other types of benefits accounted for under Topic 715, Compensation – Retirement Benefits.~~plans. The update ~~requires that an employer report~~is effective for fiscal years ending after December 15, 2020. Upon adoption, the ~~service cost component in~~Company and Southwest will modify their disclosures to conform to the ~~same line item or items as other compensation costs arising from services rendered by~~requirements of the ~~employees during~~update.

In August 2018, the ~~period.~~FASB issued ASU 2018-13 “Fair Value Measurement: Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.” The ~~other components~~update is intended to improve the effectiveness of ~~net benefit cost are required to be presented in~~fair value measurement disclosures and removes the ~~income statement separately from~~following disclosure requirements: the ~~service cost component~~amount of and ~~outside a subtotal~~reasons for transfers between Level 1 and Level 2 of ~~income from operations,~~the fair value hierarchy; the policy for timing of transfers between levels; and ~~be appropriately described.~~the valuation processes for Level 3 fair value measurements. The update also ~~allows only~~modifies or clarifies for investments in certain entities that calculate net asset value, a requirement to disclose the ~~service cost component (and not~~timing of liquidation of an investee’s assets and the ~~other components of periodic benefit costs) to be eligible for capitalization~~date when ~~applicable, making no exception for specialized industries, includingrate-regulated~~ ~~industries.~~

~~Southwest is a rate-regulated utility offering pension and postretirement benefits to retired employees.~~restrictions from redemption might lapse (in cases when the timing has been communicated or announced publicly). It ~~is anticipated that Southwest would continue to request recovery~~also clarifies communication requirements about measurement uncertainty as of the ~~total costs~~reporting date. For certain unobservable inputs, an entity may disclose other quantitative information in lieu of ~~defined benefit plans in rate applications filed with its various regulatory bodies. Rate-regulated entities providing utility~~the weighted average if it would be a more reasonable and ~~transmission services have historically capitalized a portion~~rational method to reflect the distribution of ~~periodic benefit costs (includingnon-service~~ ~~cost components) in utility infrastructure (for instance, when productive labor~~inputs to the measurements. The update is ~~also charged to capital work orders). The portion capitalized has historically been a component of depreciation~~effective for fiscal years, and related rate development through efforts of companies and their regulatory commissions. The Federal Energy Regulatory Commission (“FERC”) regulates interstate transmission pipelines and also establishes, via its Uniform System of Accounts, accounting practices of rate-regulated entities. Accounting guidelines by the FERC are typically also upheld by state commissions. Historically,interim periods within those ~~guidelines have been generally consistent with guidance in U.S. GAAP (including U.S. GAAP for rate-regulated entities). While formal guidance has not yet been published by the FERC, it~~fiscal years, beginning after December 15, 2019. Management is ~~currently believed that the FERC will permit an election to either continue to capitalizenon-service~~ benefit costs for regulatory reporting purposes or to cease capitalizing such costs and implement the Topic 715 update capitalization provisions “as is,” for regulatory purposes. Assuming the FERC formalizes the above elections, Southwest currently anticipates adopting the provisions of Topic 715 for both SEC reporting and regulatory purposes. Industry deliberations continue and management will be evaluating the ~~various~~ impacts this update ~~will~~might have on its ~~consolidated financial statements and~~ disclosures. ~~It is estimated that approximately $3 million innon-service~~ ~~costs were capitalized as a component of gas plant during 2016. Totalnon-service~~ ~~costs were approximately $20 million in 2016.~~



	14



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		~~September 30, 2017~~March 31, 2019

Note 2 – Components of Net Periodic Benefit Cost

Southwest has a noncontributory qualified retirement plan with defined benefits covering substantially all employees and a separate unfunded supplemental retirement plan (“SERP”) which is limited to officers. Southwest also provides postretirement benefits other than pensions (“PBOP”) to its qualified retirees for health care, dental, and life insurance.

~~Net~~

The service cost component of net periodic benefit costs included in the table below are components of an overhead loading process associated with the cost of labor. The overhead process ultimately results in allocation of that portion of overall net periodic benefit costs to the same accounts to which productive labor is charged. As a result, ~~net periodic benefit~~service costs become components of various accounts, primarily operations and maintenance expense, net utility plant, and deferred charges and other assets for both the Company and Southwest.

   Qualified Retirement Plan
   Period Ended September 30,
   Three Months Nine Months Twelve Months
   2017 2016 2017 2016 2017 2016
(Thousands of dollars)

Service cost
   $ 5,848 $ 5,708 $ 17,544 $ 17,125 $ 23,252 $ 23,406
Interest cost
   11,520 11,507 34,561 34,520 46,068 45,577
Expected return on plan assets
   (13,799 ) (14,140 ) (41,397 ) (42,419 ) (55,536 ) (56,871 )
Amortization of net actuarial loss
   6,001 6,317 18,003 18,950 24,319 27,136


Net periodic benefit cost
   $ 9,570 $ 9,392 $ 28,711 $ 28,176 $ 38,103 $ 39,248


   SERP
   Period Ended September 30,
   Three Months Nine Months Twelve Months
   2017 2016 2017 2016 2017 2016
(Thousands of dollars)

Service cost
   $ 77 $ 83 $ 232 $ 248 $ 315 $ 328
Interest cost
   471 464 1,413 1,394 1,878 1,818
Amortization of net actuarial loss
   361 346 1,081 1,038 1,426 1,361


Net periodic benefit cost
   $ 909 $ 893 $ 2,726 $ 2,680 $ 3,619 $ 3,507


   PBOP
   Period Ended September 30,
   Three Months Nine Months Twelve Months
   2017 2016 2017 2016 2017 2016
(Thousands of dollars)

Service cost
   $ 367 $ 375 $ 1,101 $ 1,124 $ 1,476 $ 1,534
Interest cost
   808 795 2,424 2,386 3,218 3,136
Expected return on plan assets
   (839 ) (787 ) (2,518 ) (2,362 ) (3,305 ) (3,228 )
Amortization of prior service costs
   333 333 1,001 1,001 1,335 1,335
Amortization of net actuarial loss
   —   104 —   312 105 398


Net periodic benefit cost
   $ 669 $ 820 $ 2,008 $ 2,461 $ 2,829 $ 3,175

The other components of net periodic benefit cost are reflected in Other income (deductions) on the Condensed Consolidated Statements of Income of the Company and Southwest.



	Qualified Retirement Plan
	Period Ended March 31,
	Three Months						Twelve Months
	2019			2018			2019			2018
(Thousands of dollars)
Service cost	$	6,466		$	7,139		$	27,882		$	24,683
Interest cost	12,252			11,043			45,383			45,606
Expected return on plan assets	(15,061		)	(14,689		)	(59,127		)	(56,086		)
Amortization of net actuarial loss	5,589			8,029			29,675			26,032
Net periodic benefit cost	$	9,246		$	11,522		$	43,813		$	40,235

	SERP
	Period Ended March 31,
	Three Months						Twelve Months
	2019			2018			2019			2018
(Thousands of dollars)
Service cost	$	66		$	61		$	250		$	292
Interest cost	440			415			1,683			1,827
Amortization of net actuarial loss	255			375			1,382			1,456
Net periodic benefit cost	$	761		$	851		$	3,315		$	3,575

	PBOP
	Period Ended March 31,
	Three Months						Twelve Months
	2019			2018			2019			2018
(Thousands of dollars)
Service cost	$	319		$	368		$	1,424		$	1,469
Interest cost	762			687			2,823			3,111
Expected return on plan assets	(789		)	(930		)	(3,577		)	(3,448		)
Amortization of prior service costs	317			334			1,318			1,335
Net periodic benefit cost	$	609		$	459		$	1,988		$	2,467



	15



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		~~September 30, 2017~~March 31, 2019

Note 3 – ~~Segment Information~~

Revenue

The ~~Company has two reportable segments:~~following information about the Company’s revenues is presented by segment. Southwest encompasses one segment – natural gas operations and construction services. Southwest has a single reportable segment that is referred to herein as the natural gas operations segment of the Company. In order to reconcile to net income as disclosed inoperations.

Natural Gas Operations Segment:

Gas operating revenues on the Condensed Consolidated Statements of Income ~~an Other column~~of both the Company and Southwest include revenue from contracts with customers, which is ~~included associated with impacts related to corporate~~shown below, disaggregated by customer type, and ~~administrative activities related to Southwest Gas Holdings, Inc.~~ various categories of revenue:



	Three Months Ended						Twelve Months Ended
	March 31,						March 31,
(Thousands of dollars)	2019			2018			2019			2018
Residential	$	417,228		$	344,611		$	959,837		$	859,078
Small commercial	89,610			87,943			256,750			250,331
Large commercial	13,962			15,440			51,714			54,224
Industrial/other	6,478			6,510			23,457			23,085
Transportation	24,902			24,054			87,838			89,081
Revenue from contracts with customers	552,180			478,558			1,379,596			1,275,799
Alternative revenue program revenues (deferrals)	(34,545		)	27,209			(15,775		)	66,788
Other revenues (a)	3,042			(11,454		)	20,271			(8,568		)
Total Gas operating revenues	$	520,677		$	494,313		$	1,384,092		$	1,334,019


(a)	Includes various other revenues which, in the periods presented ending March 31, 2018, were offset by a $14 million reserve against revenue associated with a tax reform savings adjustment.

Utility Infrastructure Services Segment:

The following tables ~~present~~display Centuri’s revenue, reflected as Utility infrastructure services revenues on the Condensed Consolidated Statements of Income of the Company, representing revenue from ~~external~~contracts with customers ~~intersegment revenues,~~disaggregated by service and ~~segment~~contract types:



(Thousands of dollars)	Three Months Ended				Twelve Months Ended
	March 31,				March 31,
	2019		2018		2019		2018
Service Types:
Gas infrastructure services	$	197,893	$	193,527	$	1,128,048	$	938,342
Electric power infrastructure services	52,301		5,402		79,528		19,893
Other	62,668		61,088		367,554		356,131
Total Utility infrastructure services revenues	$	312,862	$	260,017	$	1,575,130	$	1,314,366



(Thousands of dollars)	Three Months Ended				Twelve Months Ended
	March 31,				March 31,
	2019		2018		2019		2018
Contract Types:
Master services agreement	$	235,655	$	194,464	$	1,143,603	$	932,804
Bid contract	77,207		65,553		431,527		381,562
Total Utility infrastructure services revenues	$	312,862	$	260,017	$	1,575,130	$	1,314,366

Unit priced contracts	$	235,686	$	197,322	$	1,296,783	$	1,013,642
Fixed priced contracts	38,538		25,541		130,295		137,724
Time and materials contracts	38,638		37,154		148,052		163,000
Total Utility infrastructure services revenues	$	312,862	$	260,017	$	1,575,130	$	1,314,366

The following table provides information about contracts receivable and revenue earned on contracts in progress in excess of billings (contract asset), which are both included within Accounts receivable, net ~~income~~of allowances, as well as amounts billed in excess



	16



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		March 31, 2019

of revenue earned on contracts (contract liability), which are included in Other current liabilities as of March 31, 2019 and December 31, 2018 on the Company’s Condensed Consolidated Balance Sheets:



(Thousands of dollars)	March 31, 2019		December 31, 2018
Contracts receivable, net	$	160,973	$	186,249
Revenue earned on contracts in progress in excess of billings	97,642		87,520
Amounts billed in excess of revenue earned on contracts	4,588		4,211

The revenue earned on contracts in progress in excess of billings (contract asset) primarily relates to Centuri’s rights to consideration for work completed but not billed and/or approved at the reporting date. These contract assets are transferred to contracts receivable when the rights become unconditional. The amounts billed in excess of revenue earned (contract liability) primarily relates to the advance consideration received from customers for which work has not yet been completed. The change in this contract liability balance from December 31, 2018 to March 31, 2019 is due to revenue recognized of $4.2 million that was included in this item as of January 1, 2019, after which time it became earned and the balance was reduced, and to increases due to cash received, net of revenue recognized during the period related to contracts that commenced during the period.

For contracts that have an original duration of one year or less, Centuri uses the practical expedient applicable to such contracts and does not consider/compute an interest component based on the time value of money. Further, because of the short duration of these contracts, Centuri has not disclosed the transaction price for the ~~two reportable segments~~remaining performance obligations as of the end of each reporting period or when the Company expects to recognize the revenue.

As of March 31, 2019, Centuri has seventeen contracts that had an original duration of more than one year. The aggregate amount of the transaction price allocated to the unsatisfied performance obligations of these contracts as of March 31, 2019 is $60.7 million. Centuri expects to recognize the remaining performance obligations over the next three years; however, the timing of that recognition is largely within the control of the customer, including when the necessary equipment and materials required to complete the work are provided by the customer.

Utility infrastructure services contracts receivable consists of the following:



(Thousands of dollars)	March 31, 2019			December 31, 2018
Billed on completed contracts and contracts in progress	$	159,829		$	184,100
Other receivables	1,527			2,588
Contracts receivable, gross	161,356			186,688
Allowance for doubtful accounts	(383		)	(439		)
Contracts receivable, net	$	160,973		$	186,249



	17



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		March 31, 2019

Note 4 – Leases

The Company and Southwest adopted Topic 842 as of January 1, 2019. In association with the adoption, the Company recorded adjustments to its Condensed Consolidated Balance Sheet to record right-of-use (“ROU”) assets and lease liabilities of $58.4 million and $60.8 million, respectively. Included in those amounts, Southwest recorded $1.9 million related to both its ROU assets and lease liabilities. Neither the Company nor Southwest experienced a material impact to the Condensed Consolidated Statements of Income from the adoption and no cumulative-effect adjustment to the opening balance of retained earnings was recognized. Management elected to adopt the standard under the optional transition method (refer to Recent Accounting Standards Updates in Note 1 – Background, Organization, and Summary of Significant Accounting Policies), and elected the following Topic 842 practical expedients and accounting policy elections:

To use the “package”, which is a set of three practical expedients that must be elected as a package and applied consistently to all of Southwest’s and Centuri’s leases. These include: not reassessing whether any expired or existing contracts are or contain leases; not reassessing the lease classification for expired or existing leases (that is, existing operating and capital leases in accordance with current lease guidance will in each case be classified as operating and finance leases, respectively, under the updated guidance); and not reassessing initial direct costs for any existing leases.

To utilize the practical expedient to exclude all easements in place prior to January 1, 2019 from treatment under Topic 842. However, Southwest will evaluate new easements entered into after the effective date of the standard to determine if the arrangements should be accounted for as leases.

To make an accounting policy election by asset class to include both the lease and non-lease components (as defined in the guidance) as a single component.

To make an accounting policy election to not apply Topic 842 to short-term leases, as permitted.

To not elect to use hindsight in determining the lease term and in assessing impairment of ROU assets.

To utilize a portfolio approach to effectively account for the operating lease ROU assets and liabilities with regard to certain equipment leases at Centuri.

Southwest and Centuri determine if an arrangement is a lease at inception. ROU assets represent the right to use an underlying asset for the lease term; lease liabilities represent obligations to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most of Southwest’s and Centuri’s leases do not provide an implicit interest rate, an incremental borrowing rate based on information available at commencement is used in determining the present value of lease payments; an implicit rate, if readily determinable, is used. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised.

Southwest’s leases are comprised primarily of operating leases of buildings, land, and equipment. Southwest has no finance leases and no significant short-term leases. Southwest’s leases have a remaining term of 1 to 10 years, some of which include options to extend the lease up to 3 years. Southwest is currently not a lessor in any significant lease arrangements. Southwest’s ROU assets are included in Gas plant, and its lease liabilities are included in, depending upon maturity, Other current liabilities or Other deferred credits and other long-term liabilities on the Company’s and Southwest’s Condensed Consolidated Balance Sheet as of March 31, 2019.

Centuri has operating and finance leases for corporate and field offices, construction equipment, and transportation vehicles. Centuri is currently not a lessor in any significant lease arrangements. Centuri’s leases have remaining lease terms of 1 to 14 years. Some of these include options to extend the leases, generally for optional terms of up to 5 years, and some include options to terminate the leases within 1 year. Centuri’s equipment leases may include variable payment terms in addition to the fixed lease payments if machinery is used in excess of the standard work periods. These variable payments are not probable of occurring under the current operating environment and have not been included in consideration of lease payments. Expense for short-term leases of Centuri during the quarter ended March 31, 2019 was $2.6 million, and such leases were not accounted for under the provisions of Topic 842, as permitted. Due to the seasonality of Centuri’s business, expense for short-term leases will fluctuate throughout the year with higher expense incurred during the warmer months. Centuri’s ROU assets are included in Other property and investments, and its lease liabilities for operating and finance leases are included, depending upon maturity, in Other current liabilities or Other deferred credits and other long-term liabilities on the Company’s Condensed Consolidated Balance Sheet as of March 31, 2019.



	18



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		March 31, 2019

The components of lease expense were as follows:



(Thousands of dollars)	Three Months Ended
	March 31, 2019
Southwest:
Operating lease cost	$	406

Centuri:
Operating lease cost	$	2,805

Finance lease cost:
Amortization of ROU assets	$	35
Interest on lease liabilities	7
Total finance lease cost	42
Short-term lease cost	2,575
Total lease cost	$	5,828

Supplemental cash flow information related to leases for the three months ended March 31, 2019 was as follows:



(Thousands of dollars)	Southwest		Centuri		Consolidated Total
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	396	$	2,555	$	2,951
Operating cash flows from finance leases	—		7		7
Financing cash flows from finance leases	—		51		51

ROU assets obtained in exchange for lease obligations:
Operating leases	$	523	$	2,321	$	2,844
Finance leases	—		84		84



	19



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		March 31, 2019

Supplemental information related to leases, including location in the Condensed Consolidated Balance Sheets, is as follows:



(Thousands of dollars)	March 31, 2019
Southwest:
Operating leases:
Net Utility Plant	$	1,977

Other current liabilities	$	745
Other deferred credits and other long-term liabilities	1,253
Total operating lease liabilities	$	1,998

Weighted average remaining lease term (in years)	4.22
Weighted average discount rate	3.39		%

Centuri:
Operating leases:
Other property and investments	$	57,267

Other current liabilities	7,178
Other deferred credits and other long-term liabilities	52,647
Total operating lease liabilities	$	59,825

Finance leases:
Other property and investments	$	639

Other current liabilities	256
Other deferred credits and other long-term liabilities	239
Total finance lease liabilities	$	495

Weighted average remaining lease term (in years)
Operating leases	9.33
Finance leases	1.63

Weighted average discount rate
Operating leases	4.08		%
Finance leases	5.84		%



	20



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		March 31, 2019

The following is a schedule of maturities of lease liabilities as of March 31, 2019:



(Thousands of dollars)	Operating leases
Southwest:
2020	$	800
2021	556
2022	295
2023	124
2024	78
Thereafter	307
Total lease payments	2,160
Less imputed interest	162
Total	$	1,998



(Thousands of dollars)	Operating leases		Finance leases
Centuri:
2020	$	10,394	$	281
2021	9,327		128
2022	8,328		67
2023	7,645		38
2024	5,710		25
Thereafter	31,303		—
Total lease payments	72,707		539
Less imputed interest	12,882		44
Total	$	59,825	$	495

As the Company and Southwest adopted Topic 842 using the optional transition method referred to in Note 1 – Background, Organization, and Summary of Significant Accounting Policies, the recent annual disclosure of rental and lease payments as of December 31, 2018 in accordance with Topic 840 is presented in the table below:



	2018		2017
Southwest Gas Corporation	$	4,556	$	4,926
Centuri	59,491		62,310
Consolidated rental payments/lease expense	$	64,047	$	67,236

The following is a schedule of future minimum lease payments for operating leases (with initial or remaining terms in excess of one year) as of December 31, 2018 (thousands of dollars):

   Natural Gas
Operations    Construction
Services    Other    Total
Three months ended September 30, 2017

Revenues from external customers
   $ 213,059    $ 351,850    $ —      $ 564,909
Intersegment revenues
   —      28,244    —      28,244








Total
   $ 213,059    $ 380,094    $ —      $ 593,153








Segment net income (loss)
   $ (4,024 )    $ 14,335    $ (107 )    $ 10,204








Three months ended September 30, 2016

Revenues from external customers
   $ 200,179    $ 312,531    $ —      $ 512,710
Intersegment revenues
   —      27,259    —      27,259








Total
   $ 200,179    $ 339,790    $ —      $ 539,969








Segment net income (loss)
   $ (12,405 )    $ 14,877    $ —      $ 2,472








   Natural Gas
Operations    Construction
Services    Other    Total
Nine months ended September 30, 2017

Revenues from external customers
   $ 935,823    $ 800,073    $ —      $ 1,735,896
Intersegment revenues
   —      72,463    —      72,463








Total
   $ 935,823    $ 872,536    $ —      $ 1,808,359








Segment net income (loss)
   $ 82,436    $ 15,717    $ (777 )    $ 97,376








Nine months ended September 30, 2016

Revenues from external customers
   $ 980,927    $ 762,835    $ —      $ 1,743,762
Intersegment revenues
   —      75,203    —      75,203








Total
   $ 980,927    $ 838,038    $ —      $ 1,818,965








Segment net income
   $ 67,536    $ 19,325    $ —      $ 86,861








   Natural Gas
Operations    Construction
Services    Other    Total
Twelve months ended September 30, 2017

Revenues from external customers
   $ 1,276,308    $ 1,078,195    $ —      $ 2,354,503
Intersegment revenues
   —      95,381    —      95,381








Total
   $ 1,276,308    $ 1,173,576    $ —      $ 2,449,884








Segment net income (loss)
   $ 134,323    $ 29,010    $ (777 )    $ 162,556








Twelve months ended September 30, 2016

Revenues from external customers
   $ 1,376,388    $ 1,022,416    $ —      $ 2,398,804
Intersegment revenues
   —      105,566    —      105,566








Total
   $ 1,376,388    $ 1,127,982    $ —      $ 2,504,370








Segment net income
   $ 119,836    $ 33,144    $ —      $ 152,980



	Southwest		Centuri		Consolidated Total
2019	$	898	$	10,053	$	10,951
2020	363		7,656		8,019
2021	299		5,760		6,059
2022	163		5,163		5,326
2023	79		3,681		3,760
Thereafter	177		10,511		10,688
Total minimum lease payments	$	1,979	$	42,824	$	44,803

As of December 31, 2018 Centuri leased certain construction equipment under capital leases arrangements which were not significant.



	21



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		March 31, 2019

Note 45 – Derivatives ~~and Fair Value Measurements~~

~~Derivatives.~~

In managing its natural gas supply portfolios, Southwest has historically entered into fixed- and variable-price contracts, which qualify as derivatives. Additionally, Southwest utilizesfixed-for-floating swap contracts (“Swaps”) to supplement its fixed-price contracts. The fixed-price contracts, firm commitments to purchase a fixed amount of gas in the future at a fixed price, qualify for the normal purchases and normal sales exception that is allowed for contracts that are probable of delivery in the normal course of business, and are exempt from fair value reporting.


~~SOUTHWEST GAS HOLDINGS, INC.~~		~~Form 10-Q~~
~~SOUTHWEST GAS CORPORATION~~		~~September 30, 2017~~

The variable-price contracts ~~have~~qualify as derivative instruments; however, because the contract price is the prevailing price at the future transaction date, the contract has no ~~significant market~~determinable fair value. The ~~Swaps~~Swaps’ contract prices are determined at the beginning of each month to reflect that month’s published first of month index price and are recorded at fair value.

Southwest does not utilize derivative financial instruments for speculative purposes, nor does it have trading operations.

The fixed-price contracts and Swaps are utilized by Southwest under its volatility mitigation programs to effectively fix the price on a portion (up to 25% in the Arizona and California jurisdictions) of its natural gas supply portfolios. The maturities of the Swaps highly correlate to forecasted purchases of natural gas, during time frames ranging from April 30, 2019 through October ~~2017 through March 2019.~~31, 2020. Under such contracts, Southwest pays the counterparty a fixed rate and receives from the counterparty a floating rate per MMBtu (“dekatherm”) of natural gas. Only the net differential is actually paid or received. The differential is calculated based on the notional amounts under the contracts, which are detailed in the table below (thousands of dekatherms):

   September 30, 2017    December 31, 2016
Contract notional amounts
   10,936    10,543

~~Southwest does not utilize derivative financial instruments for speculative purposes, nor does it have trading operations.~~



	March 31, 2019	December 31, 2018
Contract notional amounts	14,757	13,387

The following table sets forth the gains and (losses) recognized on the Swaps (derivatives) for the three-~~, nine-,~~ and twelve-month periods ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018 and their location in the Condensed Consolidated Statements of Income for both the Company and Southwest:

Gains (losses) recognized in income for derivatives not designated as hedging instruments:

~~(Thousands of dollars)~~

      Three Months Ended Nine Months Ended Twelve Months Ended
   Location of Gain or (Loss)    September 30 September 30 September 30
Instrument

Recognized in Income on Derivative
   2017 2016 2017 2016 2017 2016
Swaps
   Net cost of gas sold    $ (546 ) $ (2,072 ) $ (6,851 ) $ 2,253 $ (4,098 ) $ (656 )
Swaps
   Net cost of gas sold    546 * 2,072 * 6,851 * (2,253 )* 4,098 * 656 *


Total
      $ —   $ —   $ —   $ —   $ —   $ —



(Thousands of dollars)
		Three Months Ended								Twelve Months Ended
	Location of Gain or (Loss) Recognized in Income on Derivatives	March 31,								March 31,
Instrument		2019				2018				2019				2018
Swaps	Net cost of gas sold	$	(3,533	)		$	(5,196	)		$	(450	)		$	(11,631	)
Swaps	Net cost of gas sold	3,533			*	5,196			*	450			*	11,631			*
Total		$	—			$	—			$	—			$	—



*	Represents the impact of regulatory deferral accounting treatment under U.S. GAAP for rate-regulated entities.

No gains (losses) were recognized in net income or other comprehensive income during the periods presented for derivatives designated as cash flow hedging instruments. Previously, Southwest entered into two forward-starting interest rate swaps (“FSIRS”), both of which were designated cash flow hedges, to partially hedge the risk of interest rate variability during the period leading up to the planned issuance of debt. The first FSIRS terminated in December 2010. The second FSIRS terminated in March 2012. Losses on both FSIRS are being amortized overten-year periods from Accumulated other comprehensive income (loss) into interest expense.



	22



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		March 31, 2019

The following table sets forth the fair values of the Swaps and their location in the Condensed Consolidated Balance Sheets for both the Company and Southwest (thousands of dollars):

Fair values of derivatives not designated as hedging instruments:

September 30, 2017
Instrument

Balance Sheet Location
   Asset
Derivatives    Liability
Derivatives    Net
Total
Swaps
   Prepaids and other current assets    $ 56    $ (22 )    $ 34
Swaps
   Other current liabilities    27    (1,899 )    (1,872 )
Swaps
   Other deferred credits    1    (768 )    (767 )






Total
      $ 84    $ (2,689 )    $ (2,605 )






December 31, 2016
Instrument

Balance Sheet Location
   Asset
Derivatives    Liability
Derivatives    Net
Total
Swaps
   Deferred charges and other assets    $ 899    $ (54 )    $ 845
Swaps
   Prepaids and other current assets    3,551    (19 )    3,532






Total
      $ 4,450    $ (73 )    $ 4,377


~~SOUTHWEST GAS HOLDINGS, INC.~~		~~Form 10-Q~~
~~SOUTHWEST GAS CORPORATION~~		~~September 30, 2017~~



March 31, 2019		Asset		Liability
Instrument	Balance Sheet Location	Derivatives		Derivatives			Net Total
Swaps	Other current liabilities	$	805	$	(4,472	)	$	(3,667	)
Swaps	Other deferred credits	60		(809		)	(749		)
Total		$	865	$	(5,281	)	$	(4,416	)

December 31, 2018		Asset		Liability
Instrument	Balance Sheet Location	Derivatives		Derivatives			Net Total
Swaps	Prepaid and other current assets	$	243	$	(99	)	$	144
Swaps	Other current liabilities	1,595		(3,347		)	(1,752		)
Swaps	Other deferred credits	141		(251		)	(110		)
Total		$	1,979	$	(3,697	)	$	(1,718	)

The estimated fair values of the natural gas derivatives were determined using future natural gas index prices (as more fully described below). Master netting arrangements exist with each counterparty that provide for the net settlement (in the settlement month) of all contracts through a single payment. As applicable, management has elected to reflect the net amounts in its balance sheets. There was no outstanding collateral associated with the Swaps during either period shown in the above table.

Pursuant to regulatory deferral accounting treatment for rate-regulated entities, unrealized gains and losses in fair value of the Swaps are recorded as a regulatory asset and/or liability. When the Swaps mature, any prior positions held are reversed and the settled position is recorded as an increase or decrease of purchased gas under the related ~~purchased~~purchase gas adjustment (“PGA”) mechanism in determining ~~its~~the deferred PGA balances. Neither changes in fair value nor settled amounts of Swaps have a direct effect on earnings or other comprehensive income.

The following table shows the amounts Southwest paid to and received from counterparties for settlements of matured Swaps.

   Three Months Ended    Nine Months Ended    Twelve Months Ended
(Thousands of dollars)    September 30, 2017    September 30, 2017    September 30, 2017
Paid to counterparties
   $ 143    $ 1,555    $ 2,655






Received from counterparties
   $ —      $ 1,685    $ 2,060



	Three Months Ended		Twelve Months Ended
(Thousands of dollars)	March 31, 2019		March 31, 2019
Paid to counterparties	$	1,882	$	5,948
Received from counterparties	$	1,047	$	1,653

The following table details the regulatory assets/(liabilities) offsetting the derivatives at fair value in the Condensed Consolidated Balance Sheets for both the Company and Southwest (thousands of dollars).

September 30, 2017
Instrument

Balance Sheet Location
   Net Total
Swaps    Other current liabilities    $ (34 )
Swaps    Prepaids and other current assets    1,872
Swaps    Deferred charges and other assets    767
December 31, 2016
Instrument

Balance Sheet Location
   Net Total
Swaps    Other deferred credits    $ (845 )
Swaps    Other current liabilities    (3,532 )

~~Fair Value Measurements.~~



March 31, 2019
Instrument	Balance Sheet Location	Net Total
Swaps	Prepaid and other current assets	$	3,667
Swaps	Deferred charges and other assets	749

December 31, 2018
Instrument	Balance Sheet Location	Net Total
Swaps	Other current liabilities	$	(144	)
Swaps	Prepaid and other current assets	1,752
Swaps	Deferred charges and other assets	110

The estimated fair values of Southwest’s Swaps were determined at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016~~2018 using ~~New York Mercantile Exchange (“NYMEX”)~~ futures settlement prices for the delivery of natural gas at Henry Hub adjusted by the price of ~~NYMEX ClearPort basis Swaps,~~future settlement bases, which reflect the difference between the price of natural gas at a given delivery basin and the Henry Hub pricing points. These Level 2 inputs ~~(inputs, other than quoted prices, for similar assets or liabilities)~~ are observable in the marketplace throughout the full term of the Swaps, but have been credit-risk adjusted with no significant impact to the overall fair value measurement.



	23



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		March 31, 2019

The following table sets forth, by level within the three-level fair value hierarchy that ranks the inputs used to measure fair value by their reliability, the financial assets and liabilities that were accounted for at fair value by both the Company and Southwest:


~~SOUTHWEST GAS HOLDINGS, INC.~~		~~Form 10-Q~~
~~SOUTHWEST GAS CORPORATION~~		~~September 30, 2017~~

Level 2—2 - Significant other observable inputs

(Thousands of dollars)    September 30, 2017    December 31, 2016
Assets at fair value:

Prepaids and other current assets—Swaps
   $ 34    $ 3,532
Deferred charges and other assets—Swaps
   —      845
Liabilities at fair value:

Other current liabilities—Swaps
   (1,872 )    —
Other deferred credits—Swaps
   (767 )    —




Net Assets (Liabilities)
   $ (2,605 )    $ 4,377



(Thousands of dollars)	March 31, 2019			December 31, 2018
Assets at fair value:
Prepaid and other current assets - Swaps	$	—		$	144
Liabilities at fair value:
Other current liabilities - Swaps	(3,667		)	(1,752		)
Other deferred credits - Swaps	(749		)	(110		)
Net Assets (Liabilities)	$	(4,416	)	$	(1,718	)

No financial assets or liabilities associated with the Swaps, which were accounted for at fair value, fell within Level 1 ~~(quoted prices in active markets for identical financial assets)~~ or Level 3 ~~(significant unobservable inputs)~~ of the fair value hierarchy.

~~With regard to the fair values of assets associated with pension and postretirement benefit plans, asset values were last updated as required as of December 2016. Refer to~~

Note ~~10 – Pension and Other Post Retirement Benefits in the 2016 Annual Report to Shareholders on Form10-K.~~

~~Note 5~~6 – Common Stock

In January 2017, the holding company reorganization was made effective and each outstanding share of Southwest Gas Corporation common stock was converted into a share of common stock in Southwest Gas Holdings, Inc., on a~~one-for-one~~ ~~basis. The ticker symbol of the stock, “SWX,” remained unchanged, and Southwest Gas Corporation became a wholly owned subsidiary of Southwest Gas Holdings, Inc.~~

On March 29, 2017, the Company filed with the ~~Securities Exchange Commission (“SEC”)~~SEC an automatic shelf registration statement on FormS-3 (FileNo. 333-217018), which became effective upon filing, for the offer and sale of up to $150 million of common stock from time to time inat-the-market offerings under the prospectus included therein and in accordance with the Sales Agency Agreement, dated March 29, 2017, between the Company and BNY Mellon Capital Markets, LLC (the “Equity Shelf Program”). The following table provides activity in the Equity Shelf Program for the three and twelve months ended March 31, 2019:



	Three Months Ended						Twelve Months Ended
	March 31,						March 31,
	2019			2018			2019			2018
Gross proceeds	$	23,073,149		$	9,199,661		$	99,023,464		$	50,976,456
Less: agent commissions	(230,731		)	(91,997		)	(990,234		)	(509,765		)
Net proceeds	$	22,842,418		$	9,107,664		$	98,033,230		$	50,466,691

Number of shares sold	277,829			137,300			1,286,234			643,007
Weighted average price per share	$	83.05		$	67.00		$	76.99		$	79.28

During the ~~three months and nine months ending September 30, 2017,~~quarter ended March 31, 2019, the Company sold ~~through the continuous equity offering program with BNY Mellon Capital Markets, LLC as agent, an aggregate of 147,077 shares~~all of the Company’s common stock in the open market at a weighted average price of $80.07 per share, resulting in proceeds to the Company of $11,659,104, net of $117,769 in agent commissions. As of September 30, 2017, the Company had up to $138,223,127 ofremaining common stock available for sale under the program. Net proceeds from the ~~sale~~sales of shares of common stock under the Equity Shelf Program are intended for general corporate purposes, including the acquisition of property for the construction, completion, extension or improvement of pipeline systems and facilities located in and around the communities served by Southwest. ~~Commensurate with these intentions,~~Net proceeds during the 3^rd ~~quarter of 2017~~three months ended March 31, 2019 were contributed to, and reflected in the records of, Southwest (as a capital contribution from ~~the parent holding company)~~Southwest Gas Holdings, Inc.).

During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2019, the Company issued approximately ~~103,000~~53,000 shares of common stock through the Restricted Stock/Unit Plan and Management Incentive Plan.

Also during the three months ended March 31, 2019, the Company issued 34,000 shares of common stock through the Dividend Reinvestment and Stock Purchase Plan (“DRSPP”), raising approximately $2.8 million.

On May 2, 2019, at the Company’s annual meeting of shareholders, the Company’s shareholders approved an amendment to the Company’s Articles of Incorporation to increase the number of shares of common stock available for issuance from 60,000,000 to 120,000,000.



	24



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		March 31, 2019

Note 67 – Long-Term Debt

Carrying amounts of long-term debt and related estimated fair values as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016~~2018 are disclosed in the following table. Southwest’s revolving credit facility (including commercial paper) and the variable-rate Industrial Development Revenue Bonds (“IDRBs”) approximate their carrying values, as they are repaid quickly (in the case of credit facility borrowings) and have interest rates that reset frequently. These are categorized as Level 1 due to Southwest’s ability to access similar debt arrangements at measurement dates with comparable terms, including variable/market rates. The fair values of Southwest’s debentures, senior notes, and fixed-rate IDRBs were determined utilizing a market-based valuation approach, where fair values are determined based on evaluated


~~SOUTHWEST GAS HOLDINGS, INC.~~		~~Form 10-Q~~
~~SOUTHWEST GAS CORPORATION~~		~~September 30, 2017~~

pricing data, such as broker quotes and yields for similar securities adjusted for observable differences. Significant inputs used in the valuation generally include benchmark yield curves, credit ratings and issuer spreads. The external credit rating, coupon rate, and maturity of each security are considered in the valuation, as applicable. The fair values of debentures and fixed-rate IDRBs are categorized as Level 2 (observable market inputs based on market prices of similar securities). The Centuri secured revolving credit and term loan facility and Centuri other debt obligations (not actively traded) are categorized as Level 3, based on significant unobservable inputs to their fair values. Because Centuri’s debt is not publicly traded, fair values for the secured revolving credit and term loan facility and other debt obligations were based on a conventional discounted cash flow methodology and utilized current market pricing yield curves, across Centuri’s debt maturity spectrum, of other industrial bonds with an assumed credit rating comparable to the Company’s.

   September 30, 2017    December 31, 2016
   Carrying    Market    Carrying    Market
   Amount    Value    Amount    Value
(Thousands of dollars)

Southwest Gas Corporation:

Debentures:

Notes, 4.45%, due 2020
   $ 125,000    $ 130,325    $ 125,000    $ 129,703
Notes, 6.1%, due 2041
   125,000    154,434    125,000    149,734
Notes, 3.875%, due 2022
   250,000    258,943    250,000    254,900
Notes, 4.875%, due 2043
   250,000    275,168    250,000    266,793
Notes, 3.8%, due 2046
   300,000    292,578    300,000    283,029
8% Series, due 2026
   75,000    97,218    75,000    94,691
Medium-term notes, 7.59% series, due 2017
   —      —      25,000    25,040
Medium-term notes, 7.78% series, due 2022
   25,000    29,174    25,000    29,290
Medium-term notes, 7.92% series, due 2027
   25,000    31,964    25,000    31,905
Medium-term notes, 6.76% series, due 2027
   7,500    8,920    7,500    8,769
Unamortized discount and debt issuance costs
   (9,498 )       (9,931 )





   1,173,002       1,197,569





Revolving credit facility and commercial paper
   150,000    150,000    5,000    5,000





Industrial development revenue bonds:

Variable-rate bonds:

Tax-exempt Series A, due 2028
   50,000    50,000    50,000    50,000
2003 Series A, due 2038
   50,000    50,000    50,000    50,000
2008 Series A, due 2038
   50,000    50,000    50,000    50,000
2009 Series A, due 2039
   50,000    50,000    50,000    50,000
Unamortized discount and debt issuance costs
   (2,212 )       (2,489 )





   197,788       197,511





Less: current maturities
   —         (25,000 )





Long-term debt, less current maturities - Southwest Gas Corporation
   $ 1,520,790       $ 1,375,080





Centuri:

Centuri term loan facility
   $ 107,250    107,403    $ 106,700    106,819
Unamortized debt issuance costs
   (383 )       (516 )





   106,867       106,184
Centuri secured revolving credit facility
   81,250    81,402    41,185    41,292
Centuri other debt obligations
   51,527    51,978    52,635    52,840
Less: current maturities
   (28,453 )       (25,101 )





Long-term debt, less current maturities - Centuri
   $ 211,191       $ 174,903





Consolidated Southwest Gas Holdings, Inc.:

Southwest Gas Corporation long-term debt
   $ 1,520,790       $ 1,400,080
Centuri long-term debt
   239,644       200,004
Less: current maturities
   (28,453 )       (50,101 )





Long-term debt, less current maturities - Southwest Gas Holdings, Inc.
   $ 1,731,981       $ 1,549,983



	25



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		~~September 30, 2017~~March 31, 2019

~~In March 2017,~~



	March 31, 2019					December 31, 2018
	Carrying Amount			Market Value		Carrying Amount			Market Value
(Thousands of dollars)
Southwest Gas Corporation:
Debentures:
Notes, 4.45%, due 2020	$	125,000		$	126,990	$	125,000		$	126,213
Notes, 6.1%, due 2041	125,000			154,294		125,000			150,728
Notes, 3.875%, due 2022	250,000			255,015		250,000			254,195
Notes, 4.875%, due 2043	250,000			277,683		250,000			268,985
Notes, 3.8%, due 2046	300,000			283,635		300,000			267,030
Notes, 3.7%, due 2028	300,000			306,465		300,000			298,926
8% Series, due 2026	75,000			95,128		75,000			93,827
Medium-term notes, 7.78% series, due 2022	25,000			27,715		25,000			27,497
Medium-term notes, 7.92% series, due 2027	25,000			30,824		25,000			30,016
Medium-term notes, 6.76% series, due 2027	7,500			8,845		7,500			8,651
Unamortized discount and debt issuance costs	(11,641		)			(11,807		)
	1,470,859					1,470,693
Revolving credit facility and commercial paper	150,000			150,000		150,000			150,000
Industrial development revenue bonds:
Variable-rate bonds:
Tax-exempt Series A, due 2028	50,000			50,000		50,000			50,000
2003 Series A, due 2038	50,000			50,000		50,000			50,000
2008 Series A, due 2038	50,000			50,000		50,000			50,000
2009 Series A, due 2039	50,000			50,000		50,000			50,000
Unamortized discount and debt issuance costs	(1,900		)			(2,024		)
	198,100					197,976
Less: current maturities	—					—
Long-term debt, less current maturities - Southwest Gas Corporation	$	1,818,959				$	1,818,669
Centuri:
Centuri term loan facility	$	254,534		$	257,579	$	255,959		$	260,135
Unamortized debt issuance costs	(1,343		)			(1,414		)
	253,191					254,545
Centuri secured revolving credit facility	6,361			6,363		—			—
Centuri other debt obligations	62,678			63,365		67,104			67,053
Less: current maturities	(34,915		)			(33,060		)
Long-term debt, less current maturities - Centuri	$	287,315				$	288,589
Consolidated Southwest Gas Holdings, Inc.:
Southwest Gas Corporation long-term debt	$	1,818,959				$	1,818,669
Centuri long-term debt	322,230					321,649
Less: current maturities	(34,915		)			(33,060		)
Long-term debt, less current maturities - Southwest Gas Holdings, Inc.	$	2,106,274				$	2,107,258



	26



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		March 31, 2019

Southwest ~~amended its~~has a $400 million credit facility ~~increasing the borrowing capacity from $300 million to $400 million. Also, the facility was previously~~that is scheduled to expire in March ~~2021 and was extended to March~~ 2022. Southwest ~~continues to designate~~designates $150 million of capacity related to the facility as long-term debt and ~~with the total capacity now available,~~ has designated the remaining $250 million for working capital purposes. Interest rates for the credit facility are calculated at either the London Interbank Offered Rate (“LIBOR”) or an “alternate base rate,” plus in each case an applicable margin that is determined based on ~~the~~ Southwest’s senior unsecured debt rating. At ~~September 30, 2017,~~March 31, 2019, the applicable margin is 1% for loans bearing interest with reference to LIBOR and 0% for loans bearing interest with reference to the alternative base rate. At ~~September 30, 2017,~~March 31, 2019, $150 million was outstanding on the long-term portion (including the commercial paper program, discussed below) and ~~$83~~$188 million was outstanding on the short-term portion of this credit facility ~~(See~~(see Note 78 – Short-Term Debt).

~~At September 30, 2017, Centuri~~

Southwest has a ~~$300~~$50 million commercial paper program. Any issuance under the commercial paper program is supported by Southwest’s current revolving credit facility and, therefore, does not represent additional borrowing capacity under the credit facility. Borrowings under the commercial paper program are designated as long-term debt. Interest rates for the program are calculated at the then current commercial paper rate. At March 31, 2019, as noted above, $50 million was outstanding under the commercial paper program.

In November 2018, Centuri, in association with the acquisition of Linetec, amended and restated its senior secured revolving credit and term loan facility, ~~that~~increasing the capacity from $450 million to $590 million; the amended facility is scheduled to expire in ~~October 2019.~~November 2023. This facility includes a revolving credit facility and a term loan facility. The line of credit portion of the facility is $325 million; amounts borrowed and repaid under the revolving credit facility are available to be re-borrowed. The term loan facility portion ~~had an initial~~has a limit of approximately ~~$150 million, which was reached in 2014 and had $107 million outstanding (after repayments) at September 30, 2017.~~$265 million. The ~~$300~~$590 million revolving credit and term loan facility is secured by substantially all of Centuri’s assets except those explicitly excluded under the terms of the agreement (including owned real estate and certain certificated vehicles). Centuri assets securing the facility at ~~September 30, 2017~~March 31, 2019 totaled ~~$526 million.~~$1.1 billion. At ~~September 30, 2017, $189~~March 31, 2019, $261 million in borrowings were outstanding under the Centuri facility.

Note 78 – Short-Term Debt

~~In March 2017, Southwest Gas Holdings, Inc. entered into~~

The Company has a $100 million credit facility ~~with a borrowing capacity of $100 million~~ that ~~expires~~is scheduled to expire in March 2022. The Company ~~intends to utilize this facility for~~had no short-term ~~financing needs. Interest rates for this facility are calculated~~borrowings outstanding at either the LIBOR or the “alternate base rate,” plus in each case an applicable margin that is determined based on the Company’s senior unsecured debt rating. The applicable margin ranges from 0.75% to 1.50% for loans bearing interest with reference to LIBOR and from 0% to 0.5% for loans bearing interest with reference to the alternative base rate. The Company is also required to pay a commitment fee on the unfunded portion of the commitments based on its senior unsecured long-term debt rating. The commitment fee ranges from 0.075% to 0.200% per annum. At September 30, 2017, $27.5 million was outstandingMarch 31, 2019 under this facility.

As discussed inNote 67 – Long-Term Debt,, Southwest has a $400 million credit facility that is scheduled to expire in March 2022, of which $250 million has been designated by management for working capital purposes. Southwest had ~~$83~~$188 million in short-term borrowings outstanding at ~~September 30, 2017~~March 31, 2019 under this facility.



	27



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		~~September 30, 2017~~March 31, 2019

Note 9 – Equity, Other Comprehensive Income, and Accumulated Other Comprehensive Income

The tables below provide details of activity in equity, the noncontrolling interest, and the redeemable noncontrolling interest for the Company on a consolidated basis for the three-month periods ended March 31, 2019 and March 31, 2018.



	Southwest Gas Holdings, Inc. Equity
(In thousands, except per share amounts)	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Non-controlling Interest						Redeemable Noncontrolling Interest (Temporary Equity)
(In thousands, except per share amounts)	Shares	Amount		Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Non-controlling Interest			Total			Redeemable Noncontrolling Interest (Temporary Equity)
December 31, 2018	53,026	$	54,656	$	1,305,769	$	(52,668	)	$	944,285		$	(452	)	$	2,251,590		$	81,831
Common stock issuances	365	365		27,024											27,389
Net income (loss)									94,809						94,809			575
Foreign currency exchange translation adjustment						791									791
Other comprehensive income (loss):
Net actuarial gain (loss) arising during period, less amortization of unamortized benefit plan cost, net of tax						619									619
FSIRS amounts reclassified to net income, net of tax						635									635
Dividends declared
Common: $0.545 per share									(29,285		)				(29,285		)
March 31, 2019	53,391	$	55,021	$	1,332,793	$	(50,623	)	$	1,009,809		$	(452	)	$	2,346,548		$	82,406



	Southwest Gas Holdings, Inc. Equity
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Non-controlling Interest
(In thousands, except per share amounts)	Shares	Amount		Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Non-controlling Interest			Total
December 31, 2017	48,090	$	49,720	$	955,332	$	(47,682	)	$	857,398		$	(2,365	)	$	1,812,403
Common stock issuances	247	247		10,148											10,395
Net income (loss)									79,091			(797		)	78,294
Foreign currency exchange translation adjustment						(911		)							(911		)
Other comprehensive income (loss):
Net actuarial gain (loss) arising during period, less amortization of unamortized benefit plan cost, net of tax						895									895
FSIRS amounts reclassified to net income, net of tax						635									635
Reclassification of excess deferred taxes (a)						(9,300		)	9,300						—
Dividends declared
Common: $0.52 per share									(25,335		)				(25,335		)
March 31, 2018	48,337	$	49,967	$	965,480	$	(56,363	)	$	920,454		$	(3,162	)	$	1,876,376


(a)	Reclassification for the release of excess deferred taxes as a result of the adoption of ASU No. 2018-02 “Income Statement—Reporting Comprehensive Income—Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” which permitted release of excess amounts created following the December 2017 enactment of U.S. tax reform.



	28



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		March 31, 2019

The tables below provide details of activity in equity for Southwest during the three-month periods ended March 31, 2019 and March 31, 2018. Only equity shares of the Company are publicly traded, under the ticker symbol “SWX.”



	Southwest Gas Corporation Equity
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)			Retained Earnings
(In thousands)	Shares	Amount		Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total
December 31, 2018	47,482	$	49,112	$	1,065,242	$	(49,049	)	$	717,155		$	1,782,460
Net income									103,389			103,389
Other comprehensive income (loss):
Net actuarial gain (loss) arising during period, less amortization of unamortized benefit plan cost, net of tax						619						619
FSIRS amounts reclassified to net income, net of tax						635						635
Stock-based compensation (a)				918					(160		)	758
Dividends declared to Southwest Gas Holdings, Inc.									(22,800		)	(22,800		)
Contributions from Southwest Gas Holdings, Inc.				22,842								22,842
March 31, 2019	47,482	$	49,112	$	1,089,002	$	(47,795	)	$	797,584		$	1,887,903



	Southwest Gas Corporation Equity
	Common Stock			Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings
(In thousands)	Shares	Amount		Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total
December 31, 2017	47,482	$	49,112	$	948,767		$	(47,073	)	$	659,193		$	1,609,999
Net income										90,349			90,349
Other comprehensive income (loss):
Net actuarial gain (loss) arising during period, less amortization of unamortized benefit plan cost, net of tax							895						895
FSIRS amounts reclassified to net income, net of tax							635						635
Reclassification of excess deferred taxes (b)							(9,300		)	9,300			—
Stock-based compensation (a)				(568		)				(166		)	(734		)
Dividends declared to Southwest Gas Holdings, Inc.										(22,000		)	(22,000		)
March 31, 2018	47,482	$	49,112	$	948,199		$	(54,843	)	$	736,676		$	1,679,144


(a)	Stock-based compensation is based on stock awards of Southwest Gas Corporation to be issued in shares of Southwest Gas Holdings, Inc.


(b)	Reclassification for the release of excess deferred taxes as a result of the adoption of ASU No. 2018-02, which permitted release of excess amounts created following the December 2017 enactment of U.S. tax reform.

The following information provides insight into amounts impacting the Company’s Other comprehensive income (loss), both before and after-tax impacts, within the Condensed Consolidated Statements of Comprehensive Income, which also impact Accumulated other comprehensive income in the Condensed Consolidated Balance Sheets and the associated column in the equity tables above. See Note 5 – Derivatives for additional information on the FSIRS.



	29



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		March 31, 2019

Related Tax Effects Allocated to Each Component of Other Comprehensive Income (Loss)

(Thousands of dollars)



	Three Months Ended									Three Months Ended
	March 31, 2019									March 31, 2018
	Before- Tax Amount			Tax (Expense) or Benefit (1)			Net-of- Tax Amount			Before- Tax Amount			Tax (Expense) or Benefit (1)			Net-of- Tax Amount
Defined benefit pension plans:
Amortization of prior service cost	$	317		$	(76	)	$	241		$	334		$	(80	)	$	254
Amortization of net actuarial (gain)/loss	5,844			(1,403		)	4,441			8,404			(2,017		)	6,387
Regulatory adjustment	(5,347		)	1,284			(4,063		)	(7,560		)	1,814			(5,746		)
Pension plans other comprehensive income	814			(195		)	619			1,178			(283		)	895
FSIRS (designated hedging activities):
Amounts reclassified into net income	836			(201		)	635			837			(202		)	635
FSIRS other comprehensive income	836			(201		)	635			837			(202		)	635
Total other comprehensive income - Southwest Gas Corporation	1,650			(396		)	1,254			2,015			(485		)	1,530
Foreign currency translation adjustments:
Translation adjustments	791			—			791			(911		)	—			(911		)
Foreign currency other comprehensive income (loss)	791			—			791			(911		)	—			(911		)
Total other comprehensive income - Southwest Gas Holdings, Inc.	$	2,441		$	(396	)	$	2,045		$	1,104		$	(485	)	$	619



	Twelve Months Ended									Twelve Months Ended
	March 31, 2019									March 31, 2018
	Before- Tax Amount			Tax (Expense) or Benefit (1)			Net-of- Tax Amount			Before- Tax Amount			Tax (Expense) or Benefit (1)			Net-of- Tax Amount
Defined benefit pension plans:
Net actuarial gain/(loss)	$	(20,426	)	$	4,902		$	(15,524	)	$	(43,027	)	$	10,326		$	(32,701	)
Amortization of prior service cost	1,318			(316		)	1,002			1,335			(460		)	875
Amortization of net actuarial (gain)/loss	31,057			(7,454		)	23,603			27,488			(9,269		)	18,219
Regulatory adjustment	(6,020		)	1,446			(4,574		)	10,515			(115		)	10,400
Pension plans other comprehensive income (loss)	5,929			(1,422		)	4,507			(3,689		)	482			(3,207		)
FSIRS (designated hedging activities):
Amounts reclassified into net income	3,344			(803		)	2,541			3,345			(1,155		)	2,190
FSIRS other comprehensive income	3,344			(803		)	2,541			3,345			(1,155		)	2,190
Total other comprehensive income (loss) - Southwest Gas Corporation	9,273			(2,225		)	7,048			(344		)	(673		)	(1,017		)
Foreign currency translation adjustments:
Translation adjustments	(1,308		)	—			(1,308		)	640			—			640
Foreign currency other comprehensive income (loss)	(1,308		)	—			(1,308		)	640			—			640
Total other comprehensive income (loss) - Southwest Gas Holdings, Inc.	$	7,965		$	(2,225	)	$	5,740		$	296		$	(673	)	$	(377	)

(1)

Tax amounts are calculated using a 24% rate following the December 22, 2017 enactment date of U.S. tax reform. For periods prior to the enactment date (and included in specific line items of the tables for the twelve months ended March 31, 2018), tax amounts were calculated using a 38% rate. The tax effect of before-tax amounts remaining in the balance of Accumulated other comprehensive income (loss) as of March 31, 2019 is effectively computed using a 24% tax rate overall. With regard to foreign currency translation adjustments, the Company has elected to indefinitely reinvest the earnings of Centuri’s Canadian subsidiaries in Canada, thus preventing deferred taxes on such earnings. As a result of this assertion, the Company is not recognizing any tax effect or presenting a tax expense or benefit for the currency translation adjustment amount reported in Other comprehensive income (loss), as repatriation of earnings is not anticipated.



	30



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		March 31, 2019

Approximately $2.5 million of realized losses (net of tax) related to the FSIRS, reported in Accumulated other comprehensive income (loss) at March 31, 2019, will be reclassified into interest expense within the next 12 months as the related interest payments on long-term debt occur.

The following table represents a rollforward of AOCI, presented on the Company’s Condensed Consolidated Balance Sheets:

AOCI - Rollforward

(Thousands of dollars)



	Defined Benefit Plans									FSIRS									Foreign Currency Items
	Before-Tax			Tax (Expense) Benefit (4,5)			After-Tax (5)			Before-Tax			Tax (Expense) Benefit (4,5)			After-Tax (5)			Before-Tax			Tax (Expense) Benefit		After-Tax			AOCI
Beginning Balance AOCI December 31, 2018	$	(55,227	)	$	13,254		$	(41,973	)	$	(9,310	)	$	2,234		$	(7,076	)	$	(3,619	)	$	—	$	(3,619	)	$	(52,668	)
Translation adjustments	—			—			—			—			—			—			791			—		791			791
Other comprehensive income (loss) before reclassifications	—			—			—			—			—			—			791			—		791			791
FSIRS amounts reclassified from AOCI (1)	—			—			—			836			(201		)	635			—			—		—			635
Amortization of prior service cost (2)	317			(76		)	241			—			—			—			—			—		—			241
Amortization of net actuarial loss (2)	5,844			(1,403		)	4,441			—			—			—			—			—		—			4,441
Regulatory adjustment (3)	(5,347		)	1,284			(4,063		)	—			—			—			—			—		—			(4,063		)
Net current period other comprehensive income (loss) attributable to Southwest Gas Holdings, Inc.	814			(195		)	619			836			(201		)	635			791			—		791			2,045
Ending Balance AOCI March 31, 2019	$	(54,413	)	$	13,059		$	(41,354	)	$	(8,474	)	$	2,033		$	(6,441	)	$	(2,828	)	$	—	$	(2,828	)	$	(50,623	)


(1)	The FSIRS reclassification amounts are included in Net interest deductions on the Company’s Condensed Consolidated Statements of Income.


(2)	These AOCI components are included in the computation of net periodic benefit cost (see Note 2 – Components of Net Periodic Benefit Cost for additional details).


(3)	The regulatory adjustment represents the portion of the activity above that is expected to be recovered through rates in the future (the related regulatory asset is included in Deferred charges and other assets on the Company’s Condensed Consolidated Balance Sheets).


(4)	Tax amounts are calculated using a 24% rate.


(5)	The beginning balances depict amounts attributable to the individual components of AOCI (Defined Benefit Plans and FSIRS) following the adoption of ASU No. 2018-02, with no impact to the total balance of AOCI resulting from the depiction.



	31



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		March 31, 2019

The following table represents a rollforward of AOCI, presented on Southwest’s Condensed Consolidated Balance Sheets:

AOCI - Rollforward

(Thousands of dollars)



	Defined Benefit Plans									FSIRS
	Before-Tax			Tax (Expense) Benefit (9,10)			After-Tax (10)			Before-Tax			Tax (Expense) Benefit (9,10)			After-Tax (10)			AOCI
Beginning Balance AOCI December 31, 2018	$	(55,227	)	$	13,254		$	(41,973	)	$	(9,310	)	$	2,234		$	(7,076	)	$	(49,049	)
FSIRS amounts reclassified from AOCI (6)	—			—			—			836			(201		)	635			635
Amortization of prior service cost (7)	317			(76		)	241			—			—			—			241
Amortization of net actuarial loss (7)	5,844			(1,403		)	4,441			—			—			—			4,441
Regulatory adjustment (8)	(5,347		)	1,284			(4,063		)	—			—			—			(4,063		)
Net current period other comprehensive income attributable to Southwest Gas Corporation	814			(195		)	619			836			(201		)	635			1,254
Ending Balance AOCI March 31, 2019	$	(54,413	)	$	13,059		$	(41,354	)	$	(8,474	)	$	2,033		$	(6,441	)	$	(47,795	)


(6)	The FSIRS reclassification amounts are included in Net interest deductions on Southwest’s Condensed Consolidated Statements of Income.


(7)	These AOCI components are included in the computation of net periodic benefit cost (see Note 2 – Components of Net Periodic Benefit Cost for additional details).


(8)	The regulatory adjustment represents the portion of the activity above that is expected to be recovered through rates in the future (the related regulatory asset is included in Deferred charges and other assets on Southwest’s Condensed Consolidated Balance Sheets).


(9)	Tax amounts are calculated using a 24% rate.


(10)	The beginning balances depict amounts attributable to the individual components of AOCI (Defined Benefit Plans and FSIRS) following the adoption of ASU No. 2018-02, with no impact to the total balance of AOCI resulting from the depiction.

The following table represents amounts (before income tax impacts) included in AOCI (in the tables above), that have not yet been recognized in net periodic benefit cost:

Amounts Recognized in AOCI (Before Tax)

(Thousands of dollars)



	March 31, 2019			December 31, 2018
Net actuarial (loss) gain	$	(429,520	)	$	(435,364	)
Prior service cost	(2,716		)	(3,033		)
Less: amount recognized in regulatory assets	377,823			383,170
Recognized in AOCI	$	(54,413	)	$	(55,227	)



	32



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		March 31, 2019

Note 810 – ~~Equity,~~Segment Information

The Company has two reportable segments: natural gas operations and utility infrastructure services. Southwest has a single reportable segment that is referred to herein as the natural gas operations segment of the Company. In order to reconcile to net income as disclosed in the Condensed Consolidated Statements of Income, an Other ~~Comprehensive Income,~~column is included associated with impacts related to corporate and ~~Accumulated Other Comprehensive Income~~

~~The table below provides details of activity in equity and the redeemable noncontrolling interest for~~administrative activities related to Southwest Gas Holdings, Inc. The following tables present revenues from external customers, intersegment revenues, and segment net income for the two reportable segments (thousands of dollars):



	Natural Gas Operations		Utility Infrastructure Services			Other			Total
Three Months Ended March 31, 2019
Revenues from external customers	$	520,677	$	274,189		$	—		$	794,866
Intersegment revenues	—		38,673			—			38,673
Total	$	520,677	$	312,862		$	—		$	833,539
Segment net income (loss)	$	103,389	$	(8,031	)	$	(549	)	$	94,809
Three Months Ended March 31, 2018
Revenues from external customers	$	494,313	$	232,859		$	—		$	727,172
Intersegment revenues	—		27,158			—			27,158
Total	$	494,313	$	260,017		$	—		$	754,330
Segment net income (loss)	$	90,349	$	(11,001	)	$	(257	)	$	79,091

	Natural Gas Operations		Utility Infrastructure Services			Other			Total
Twelve Months Ended March 31, 2019
Revenues from external customers	$	1,384,092	$	1,427,701		$	—		$	2,811,793
Intersegment revenues	—		147,429			—			147,429
Total	$	1,384,092	$	1,575,130		$	—		$	2,959,222
Segment net income (loss)	$	151,882	$	47,947		$	(1,834	)	$	197,995
Twelve Months Ended March 31, 2018
Revenues from external customers	$	1,334,019	$	1,211,345		$	—		$	2,545,364
Intersegment revenues	—		103,021			—			103,021
Total	$	1,334,019	$	1,314,366		$	—		$	2,648,385
Segment net income (loss)	$	170,229	$	34,693		$	(1,298	)	$	203,624

Note 11 – Redeemable Noncontrolling Interest

In connection with the acquisition of Linetec in November 2018, the previous owner retained a 20% equity interest in Linetec, the reduction of which is subject to certain rights based on the passage of time or upon the occurrence of certain triggering events. Effective January 2022, the Company has the right, but not the obligation, to purchase at fair value (subject to a ~~consolidated basis during the nine months ended September 30, 2017.~~

Southwest Gas Holdings, Inc. Equity
Accumulated Redeemable
Additional Other Non- Noncontrolling
Common Stock Paid-in Comprehensive Retained controlling Interest
(In thousands, except per share amounts)
Shares Amount Capital Income (Loss) Earnings Interest Total (Temporary
Equity)
DECEMBER 31, 2016
47,482 $ 49,112 $ 903,123 $ (48,008 ) $ 759,263 $ (2,217 ) $ 1,661,273 $ 22,590
Common stock issuances
250 250 21,090 21,340
Net income (loss)
97,376 (78 ) 97,298 248
Redemption value adjustments
(355 ) (355 ) 355
Foreign currency exchange translation adj.
1,850 1,850 11
Redemption of Centuri shares from noncontrolling parties
(23,000 )
Other comprehensive income (loss):

Net actuarial gain (loss) arising during period, less amortization of unamortized benefit plan cost, net of tax
1,786 1,786
Amounts reclassified to net income, net of tax (FSIRS)
1,554 1,554
Centuri dividend to redeemable noncontrolling interest
(204 )
Dividends declared

Common: $1.485 per share
(71,350 ) (71,350 )

SEPTEMBER 30, 2017
47,732 $ 49,362 $ 924,213 $ (42,818 ) $ 784,934 $ (2,295 ) $ 1,713,396 $ —

~~The table below provides details of activity in equity for Southwest Gas Corporation during the nine months ended September 30, 2017. Effective in January 2017, Southwest became~~floor) a ~~subsidiary of Southwest Gas Holdings, Inc., and only equity shares~~portion of the ~~latter~~interest held by the noncontrolling party, and in incremental amounts each year thereafter. The shares subject to the election accumulate (if earlier elections are ~~publicly traded, under~~not made) such that 100% of the ~~ticker symbol “SWX.”~~

   Southwest Gas Corporation Equity
            Accumulated
         Additional    Other
   Common Stock    Paid-in    Comprehensive Retained
(In thousands, except per share amounts)
   Shares    Amount    Capital    Income (Loss) Earnings Total
DECEMBER 31, 2016
   47,482    $ 49,112    $ 897,346    $ (45,639 ) $ 767,061 $ 1,667,880
Net income
            82,436 82,436
Other comprehensive income (loss):

Net actuarial gain (loss) arising during period, less amortization of unamortized benefit plan cost, net of tax
            1,786 1,786
Amounts reclassified to net income, net of tax (FSIRS)
            1,554 1,554
Distribution to Southwest Gas Holdings, Inc. investment in discontinued operations
            (182,773 ) (182,773 )
Stock-based compensation (a)
         8,576    (587 ) 7,989
Dividends declared to Southwest Gas Holdings, Inc.
            (60,130 ) (60,130 )
Contributions from Southwest Gas Holdings, Inc.
         11,659    11,659








SEPTEMBER 30, 2017
   47,482    $ 49,112    $ 917,581    $ (42,299 ) $ 606,007 $ 1,530,401

interest retained by the noncontrolling party is subject to the election beginning in 2024. If the Company does not exercise its rights at each or any of the specified intervals, the noncontrolling party has the ability, but not the obligation, to exit their investment retained by requiring Centuri to purchase a similar portion of their interest up to the maximum cumulative amounts specified at each interval discussed above. The Company has determined that this noncontrolling interest is a redeemable noncontrolling interest and, in accordance with SEC guidance, is classified as mezzanine equity (temporary equity) in the Company’s Condensed Consolidated Balance Sheets.

~~(a)~~

Stock-based compensation is based on stock awards of Southwest Gas Corporation to be issued in shares of Southwest Gas Holdings, Inc. The table above gives effect to the holding company reorganization whereby Southwest and Centuri became subsidiaries of the Company. The historic investment in Centuri was distributed to the parent holding company. This presentation is only applicable to Southwest and not to the Company overall, as Centuri continues to be included in


	33



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		~~September 30, 2017~~March 31, 2019

the continuing operations of the Company. Also in connection with the holding company creation, compensation plans of Southwest include programs that will be settled with equity shares issued by Southwest Gas Holdings, Inc. Management has determined that when no consideration is directly exchanged for these programs between Southwest and the Company, the accounting impact at Southwest for these programs is reflected both as compensation expense and as an equity contribution (of the parent) in Southwest.

The following information provides insight into amounts impacting the Company’s Other Comprehensive Income (Loss), both before and after tax impacts, within the Condensed Consolidated Statements of Comprehensive Income, which also impact Accumulated Other Comprehensive Income

Significant changes in the ~~Condensed Consolidated Balance Sheets~~value of the redeemable noncontrolling interest, above a floor established at the acquisition date, are recognized as they occur, and the ~~associated column in~~carrying value is adjusted as necessary at each reporting date. The fair value is estimated using a market approach that utilizes certain financial metrics from guideline public companies of similar industry and operating characteristics. However, the ~~equity table above,~~carrying value of the redeemable noncontrolling interest was greater than its fair value as ~~well as the Redeemable Noncontrolling Interest. See~~ ~~Note 4 – Derivatives~~of March 31, 2019, and ~~Fair Value Measurements~~ ~~for additional information on the FSIRS.~~

~~Related Tax Effects Allocated to Each Component of Other Comprehensive Income (Loss)~~

~~(Thousands of dollars)~~

   Three Months Ended
September 30, 2017 Three Months Ended
September 30, 2016
   Before- Tax Net-of- Before- Tax Net-of-
   Tax (Expense) Tax Tax (Expense) Tax
   Amount or Benefit (1) Amount Amount or Benefit (1) Amount
Defined benefit pension plans:

Amortization of prior service cost
   $ 333 $ (126 ) $ 207 $ 333 $ (126 ) $ 207
Amortization of net actuarial (gain)/loss
   6,362 (2,418 ) 3,944 6,767 (2,571 ) 4,196
Regulatory adjustment
   (5,734 ) 2,179 (3,555 ) (6,122 ) 2,326 (3,796 )


Pension plans other comprehensive income (loss)
   961 (365 ) 596 978 (371 ) 607
FSIRS (designated hedging activities):

Amounts reclassifed into net income
   835 (317 ) 518 835 (317 ) 518


FSIRS other comprehensive income
   835 (317 ) 518 835 (317 ) 518


Total other comprehensive income (loss) - Southwest Gas Corporation
   1,796 (682 ) 1,114 1,813 (688 ) 1,125


Foreign currency translation adjustments:

Translation adjustments
   1,012 —   1,012 (238 ) —   (238 )


Foreign currency other comprehensive income (loss)
   1,012 —   1,012 (238 ) —   (238 )


Total other comprehensive income (loss) - Southwest Gas Holdings, Inc.
   $ 2,808 $ (682 ) $ 2,126 $ 1,575 $ (688 ) $ 887


   Nine Months Ended
September 30, 2017 Nine Months Ended
September 30, 2017
   Before- Tax Net-of- Before- Tax Net-of-
   Tax (Expense) Tax Tax (Expense) Tax
   Amount or Benefit (1) Amount Amount or Benefit (1) Amount
Defined benefit pension plans:

Amortization of prior service cost
   $ 1,001 $ (380 ) $ 621 $ 1,001 $ (380 ) $ 621
Amortization of net actuarial (gain)/loss
   19,084 (7,252 ) 11,832 20,300 (7,714 ) 12,586
Regulatory adjustment
   (17,204 ) 6,537 (10,667 ) (18,368 ) 6,980 (11,388 )


Pension plans other comprehensive income (loss)
   2,881 (1,095 ) 1,786 2,933 (1,114 ) 1,819
FSIRS (designated hedging activities):

Amounts reclassifed into net income
   2,507 (953 ) 1,554 2,508 (952 ) 1,556


FSIRS other comprehensive income
   2,507 (953 ) 1,554 2,508 (952 ) 1,556


Total other comprehensive income (loss)—Southwest Gas Corporation
   5,388 (2,048 ) 3,340 5,441 (2,066 ) 3,375


Foreign currency translation adjustments:

Translation adjustments
   1,861 —   1,861 614 —   614


Foreign currency other comprehensive income (loss)
   1,861 —   1,861 614 —   614


Total other comprehensive income (loss)
   $ 7,249 $ (2,048 ) $ 5,201 $ 6,055 $ (2,066 ) $ 3,989


~~SOUTHWEST GAS HOLDINGS, INC.~~		~~Form 10-Q~~
~~SOUTHWEST GAS CORPORATION~~		~~September 30, 2017~~

   Twelve Months Ended
September 30, 2017 Twelve Months Ended
September 30, 2016
   Before- Tax Net-of- Before- Tax Net-of-
   Tax (Expense) Tax Tax (Expense) Tax
   Amount or Benefit (1) Amount Amount or Benefit (1) Amount
Defined benefit pension plans:

Net actuarial gain/(loss)
   $ (22,770 ) $ 8,652 $ (14,118 ) $ (30,519 ) $ 11,597 $ (18,922 )
Amortization of prior service cost
   1,335 (507 ) 828 1,335 (507 ) 828
Amortization of net actuarial (gain)/loss
   25,850 (9,823 ) 16,027 28,895 (10,980 ) 17,915
Regulatory adjustment
   (4,420 ) 1,679 (2,741 ) (653 ) 249 (404 )


Pension plans other comprehensive income (loss)
   (5 ) 1 (4 ) (942 ) 359 (583 )
FSIRS (designated hedging activities):

Amounts reclassifed into net income
   3,344 (1,271 ) 2,073 3,344 (1,271 ) 2,073


FSIRS other comprehensive income (loss)
   3,344 (1,271 ) 2,073 3,344 (1,271 ) 2,073


Total other comprehensive income (loss)—Southwest Gas Corporation
   3,339 (1,270 ) 2,069 2,402 (912 ) 1,490


Foreign currency translation adjustments:

Translation adjustments
   1,408 —   1,408 233 —   233


Foreign currency other comprehensive income (loss)
   1,408 —   1,408 233 —   233


Total other comprehensive income (loss)—Southwest Gas Holdings, Inc.
   $ 4,747 $ (1,270 ) $ 3,477 $ 2,635 $ (912 ) $ 1,723

~~(1)~~

Tax amounts are calculated using a 38% rate. The Company has elected to indefinitely reinvest the earnings of Centuri’s Canadian subsidiaries in Canada, thus preventing deferred taxes on such earnings. As a result of this assertion, the Company is not recognizing any tax effect or presenting a tax expense or benefit for the currency translation adjustment amount reported in Other Comprehensive Income, as repatriation of earnings is not anticipated.

Approximately $2.1 million of realized losses (net of tax) related to the FSIRS, reported in Accumulated other comprehensive income (“AOCI”) at September 30, 2017, will be reclassified into interest expense within the next 12 months as the related interest payments on long-term debt occur.

~~The~~no previous upward redemption value adjustments were made following ~~table represents a rollforward of AOCI, presented on the Company’s Condensed Consolidated Balance Sheets:~~

~~AOCI—Rollforward~~

~~(Thousands of dollars)~~

   Defined Benefit Plans FSIRS Foreign Currency Items
   Before-Tax Tax
(Expense)
Benefit (4) After-Tax Before-Tax Tax
(Expense)
Benefit (4) After-Tax Before-Tax Tax
(Expense)
Benefit    After-Tax AOCI
Beginning Balance AOCI December 31, 2016
   $ (57,613 ) $ 21,893 $ (35,720 ) $ (15,999 ) $ 6,080 $ (9,919 ) $ (2,369 ) $ —      $ (2,369 ) $ (48,008 )




Translation adjustments
   —   —   —   —   —   —   1,861 —      1,861 1,861




Other comprehensive income before reclassifications
   —   —   —   —   —   —   1,861 —      1,861 1,861
FSIRS amounts reclassified from AOCI (1)
   —   —   —   2,507 (953 ) 1,554 —   —      —   1,554
Amortization of prior service cost (2)
   1,001 (380 ) 621 —   —   —�� —   —      —   621
Amortization of net actuarial loss (2)
   19,084 (7,252 ) 11,832 —   —   —   —   —      —   11,832
Regulatory adjustment (3)
   (17,204 ) 6,537 (10,667 ) —   —   —   —   —      —   (10,667 )




Net current period other comprehensive income (loss)
   2,881 (1,095 ) 1,786 2,507 (953 ) 1,554 1,861 —      1,861 5,201
Less: Translation adjustment attributable to redeemable noncontrolling interest
   —   —   —   —   —   —   11 —      11 11




Net current period other comprehensive income (loss) attributable to Southwest Gas Holdings, Inc.
   2,881 (1,095 ) 1,786 2,507 (953 ) 1,554 1,850 —      1,850 5,190




Ending Balance AOCI September 30, 2017
   $ (54,732 ) $ 20,798 $ (33,934 ) $ (13,492 ) $ 5,127 $ (8,365 ) $ (519 ) $ —      $ (519 ) $ (42,818 )

~~(1)~~

~~The FSIRS reclassification amounts are included in the Net interest deductions line item on the Company’s Condensed Consolidated Statements of Income.~~

~~(2)~~

~~These AOCI components are included in the computation of net periodic benefit cost (see~~~~Note 2 – Components of Net Periodic Benefit Cost~~~~for additional details).~~

~~(3)~~

The regulatory adjustment represents the portion of the activity above that is expected to be recovered through rates in the future (the related regulatory asset is included in the Deferred charges and other assets line item on the Company’s Condensed Consolidated Balance Sheets).

~~(4)~~

~~Tax amounts are calculated using a 38% rate.~~


~~SOUTHWEST GAS HOLDINGS, INC.~~		~~Form 10-Q~~
~~SOUTHWEST GAS CORPORATION~~		~~September 30, 2017~~

~~The following table represents a rollforward of AOCI, presented on Southwest’s Condensed Consolidated Balance Sheets:~~

~~AOCI—Rollforward~~

~~(Thousands of dollars)~~

   Defined Benefit Plans FSIRS
   Before-Tax Tax
(Expense)
Benefit (8) After-Tax Before-Tax Tax
(Expense)
Benefit (8) After-Tax AOCI
Beginning Balance AOCI December 31, 2016
   $ (57,613 ) $ 21,893 $ (35,720 ) $ (15,999 ) $ 6,080 $ (9,919 ) $ (45,639 )


FSIRS amounts reclassified from AOCI (5)
   —   —   —   2,507 (953 ) 1,554 1,554
Amortization of prior service cost (6)
   1,001 (380 ) 621 —   —   —   621
Amortization of net actuarial loss (6)
   19,084 (7,252 ) 11,832 —   —   —   11,832
Regulatory adjustment (7)
   (17,204 ) 6,537 (10,667 ) —   —   —   (10,667 )


Net current period other comprehensive income (loss) attributable to Southwest Gas Corporation
   2,881 (1,095 ) 1,786 2,507 (953 ) 1,554 3,340


Ending Balance AOCI September 30, 2017
   $ (54,732 ) $ 20,798 $ (33,934 ) $ (13,492 ) $ 5,127 $ (8,365 ) $ (42,299 )

~~(5)~~

~~The FSIRS reclassification amounts are included in the Net interest deductions line item on Southwest’s Condensed Consolidated Statements of Income.~~

~~(6)~~

~~These AOCI components are included in the computation of net periodic benefit cost (see~~~~Note 2 – Components of Net Periodic Benefit Cost~~~~for additional details).~~

~~(7)~~

The regulatory adjustment represents the portion of the activity above that is expected to be recovered through rates in the future (the related regulatory asset is included in the Deferred charges and other assets line item on Southwest’s Condensed Consolidated Balance Sheets).

~~(8)~~

~~Tax amounts are calculated using a 38% rate.~~

~~The following table represents amounts (before income tax impacts) included in AOCI (in the tables above), that have not yet been recognized in net periodic benefit cost:~~

~~Amounts Recognized in AOCI (Before Tax)~~

~~(Thousands of dollars)~~

   September 30, 2017    December 31, 2016
Net actuarial (loss) gain
   $ (411,889 )    $ (430,973 )
Prior service cost
   (4,702 )    (5,703 )
Less: amount recognized in regulatory assets
   361,859    379,063




Recognized in AOCI
   $ (54,732 )    $ (57,613 )

~~Note 9 – Construction Services Redeemable Noncontrolling Interest~~

~~In conjunction with~~ the acquisition ~~of the Canadian construction businesses in October 2014, the previous owners of the acquired companies retained~~date. SEC guidance indicates that a ~~3.4% equity interest in Centuri, which, subject to an eligibility timeline,~~redemption value adjustment would have been redeemable at the election of the noncontrolling parties (in its entirety) beginning in July 2022. In August 2017, in advance of when otherwise eligible, the parties agreed to a current redemption. Southwest Gas Holdings, Inc. paid $23 million to the previous owners, thereby acquiring the remaining 3.4% equity interest in Centuri in accordance with an early redemption agreement. Accordingly, Centuri is now a wholly owned subsidiary of the Company.


~~SOUTHWEST GAS HOLDINGS, INC.~~		~~Form 10-Q~~
~~SOUTHWEST GAS CORPORATION~~		~~September 30, 2017~~

not be made under these circumstances. The following depicts changes to the balance of the redeemable noncontrolling interest between the indicated periods.

   Redeemable
Noncontrolling
Interest
(Thousands of dollars):
Balance, December 31, 2016
   $ 22,590
Net income attributable to redeemable noncontrolling interest
   248
Foreign currency exchange translation adjustment
   11
Centuri dividend to redeemable noncontrolling interest
   (204 )
Adjustment to redemption value
   355
Redemption of Centuri shares from noncontrolling parties
   (23,000 )


Balance, September 30, 2017
   $ —



	Redeemable Noncontrolling Interest
(Thousands of dollars):
Balance, December 31, 2018	$	81,831
Net income attributable to redeemable noncontrolling interest	575
Balance, March 31, 2019	$	82,406

Note 1012 – ~~Reorganization Impacts – Discontinued Operations Solely Related to Southwest Gas Corporation~~

~~No substantive change has occurred~~Business Acquisitions

In November 2018, the Company, through its subsidiaries, led principally by Centuri, completed the acquisition of an 80% interest in a privately held infrastructure services business, Linetec Services, LLC (“Linetec”) with ~~regard to~~the remaining 20% retained by the seller. See the Company’s ~~business segments on the whole, or~~2018 Form 10-K for additional information about this acquisition.

Assets acquired and liabilities assumed in the ~~primary businesses comprising those segments (Centuri operations continue to be part of continuing operations~~transaction were recorded, generally, at their acquisition date fair values. Transaction costs associated with the acquisition were expensed as incurred. The Company’s allocation of the ~~controlled group of companies), and financial information related to Centuri continues to be included in condensed consolidated financial statements of Southwest Gas Holdings, Inc.~~

~~However, as part~~purchase price was based on an evaluation of the ~~holding company reorganization effective January 2017, Centuri~~appropriate fair values and represented management’s best estimate based on available data (including market data, data regarding customers of the acquired businesses, terms of acquisition-related agreements, analysis of historical and projected results, and other types of data). The analysis included consideration of types of intangibles that were acquired, including customer relationships, trade names, and customer contracts. Certain payments were estimated as of the acquisition date and will be adjusted when paid; the final purchase accounting has not yet been completed. Further refinement is ~~no longer a subsidiary of Southwest; whereas historically, Centuri had been a direct subsidiary of Southwest. To give effect~~expected to ~~this change, the condensed consolidated financial statements related~~occur, including potential changes to ~~Southwest Gas Corporation, which are separately included in thisForm 10-Q,~~ ~~depict Centuri-related amounts~~income taxes and intangibles, as ~~discontinued operations for periods prior to January 2017.~~

~~Due to the discontinued operations accounting reflection, the following disclosures provide~~well as additional information regarding the assets, liabilities, equity, revenues, and expenses of Centuri which are shown as discontinued operations on the condensed consolidated financial statements of Southwest Gas Corporation for periods prior to the beginning of 2017.

consideration payments held back.

The ~~following table presents the major categories~~preliminary estimated fair values of assets acquired and liabilities ~~within the amounts reported~~assumed as ~~discontinued operations – construction services in the Condensed Consolidated Balance Sheet~~ of ~~Southwest Gas Corporation:~~

November 30, 2018, are as follows (millions of dollars):



	Acquisition Date		Measurement Period Adjustments			Revised Acquisition Date
Cash and cash equivalents	$	3.9	$	—		$	3.9
Accounts receivable	32.8		(0.5		)	32.3
Revenue earned on contracts in progress in excess of billings	21.6		1.7			23.3
Prepaid expenses and other current assets	1.1		0.2			1.3
Property and equipment	89.4		(0.5		)	88.9
Intangible assets	89.3		—			89.3
Goodwill	188.5		3.3			191.8
Total assets acquired	426.6		4.2			430.8

Accounts payable	8.0		—			8.0
Accrued liabilities	6.9		1.6			8.5
Deferred compensation and related accrued taxes	3.4		—			3.4
Redeemable noncontrolling interest	81.7		—			81.7
Total liabilities assumed and noncontrolling interest	100.0		1.6			101.6
Net assets acquired	$	326.6	$	2.6		$	329.2


~~(Thousands of dollars)~~	~~December 31, 2016~~
~~Assets:~~
~~Other property and investments~~	$	~~233,774~~
~~Cash and cash equivalents~~		~~9,042~~
~~Accounts receivable, net of allowances~~		~~173,300~~
~~Prepaids and other current assets~~		~~10,470~~
~~Goodwill~~		~~129,888~~
~~Other noncurrent assets~~		~~22,897~~

~~Discontinued operations - construction services - assets~~	$	~~579,371~~

~~Liabilities:~~
~~Current maturities of long-term debt~~	$	~~25,101~~
~~Accounts payable~~		~~46,440~~
~~Other current liabilities~~		~~74,518~~
~~Long-term debt, less current maturities~~		~~174,903~~
~~Deferred income taxes and other deferred credits~~		~~59,653~~

~~Discontinued operations—construction services—liabilities~~	$	~~380,615~~


	34



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		~~September 30, 2017~~March 31, 2019

The ~~following table presents~~Company incurred and expensed acquisition costs of $6.9 million for the ~~components~~twelve months ended March 31, 2019 which are included in Utility infrastructure services expenses on the Company’s Condensed Consolidated Statement of Income. No acquisition-related costs were incurred during the three months ended March 31, 2019.

The preliminary allocation of the ~~Discontinued~~purchase price of Linetec was accounted for in accordance with applicable accounting guidance. Goodwill consists of the value associated with the assembled workforce, consolidation of operations, ~~– construction servicesnon-owner~~ ~~equity amount shown~~and the estimated economic value attributable to future opportunities related to the transaction. As the business of Linetec was deemed an asset purchase for tax purposes, the tax-basis goodwill is expected to be deductible for tax purposes. In the first quarter of 2019, values at the acquisition date were adjusted as reflected in the ~~Southwest Gas Corporation~~table above on the Company’s Condensed Consolidated Balance ~~Sheet:~~

(Thousands of dollars)    December 31, 2016
Construction services equity
   $ (4,390 )
Construction services noncontrolling interest
   (2,217 )
Construction services redeemable noncontrolling interest
   22,590


Discontinued operations - construction servicesnon-owner equity
   $ 15,983

The following table presents the major income statement components of discontinued operations – construction services reported in the Condensed Consolidated Income Statements of Southwest Gas Corporation:

~~Results of Construction Services~~

   Three    Nine    Twelve    Twelve
   Months Ended    Months Ended    Months Ended    Months Ended
(Thousands of dollars)    September 30, 2016    September 30, 2016    September 30, 2017    September 30, 2016
Construction revenues
   $ 339,790    $ 838,038    $ 301,040    $ 1,127,982
Operating expenses:

Construction expenses
   300,611    757,919    266,504    1,009,188
Depreciation and amortization
   13,409    43,351    12,318    58,368








Operating income
   25,770    36,768    22,218    60,426
Other income (deductions)
   44    44    1,149    1,246
Net interest deductions
   1,794    4,945    1,718    6,738








Income before income taxes
   24,020    31,867    21,649    54,934
Income tax expense
   8,708    12,042    7,842    20,711








Net income
   15,312    19,825    13,807    34,223
Net income attributable to noncontrolling interests
   435    500    514    1,079








Discontinued operations - construction services - net income
   $ 14,877    $ 19,325    $ 13,293    $ 33,144


~~SOUTHWEST GAS HOLDINGS, INC.~~		~~Form 10-Q~~
~~SOUTHWEST GAS CORPORATION~~		~~September 30, 2017~~

Sheets.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Southwest Gas Holdings, Inc. is a holding company that owns all of the shares of common stock of Southwest Gas Corporation (“Southwest” or the “natural gas operations” segment) and ~~prior to August 2017, 96.6%~~all of the shares of common stock of Centuri ~~Construction~~ Group, Inc. (“~~Centuri”~~Centuri,” or the ~~“construction~~“utility infrastructure services” segment). ~~During August 2017, Southwest Gas Holdings, Inc. acquired~~At the ~~remaining 3.4% equity interest in Centuri that was held by the previous owners (and reflected as a redeemable noncontrolling interest). Therefore, Centuri is now a wholly owned subsidiary~~annual meeting of shareholders of Southwest Gas Holdings, Inc. ~~Also, as part~~, held on May 2, 2019, shareholders voted to approve changing the state of ~~the holding company reorganization effective January 2017, Centuri and Southwest are now subsidiaries~~incorporation of Southwest Gas Holdings, Inc.~~; whereas historically, Centuri had been a direct subsidiary~~ from California to Delaware. We expect the reincorporation to be effective during the second or third quarter of ~~Southwest.~~2019. However, the reincorporation remains subject to certain regulatory approvals, which are currently pending, and we can provide no assurances as to the timing for such approvals. For more information about the reincorporation, please refer to Southwest Gas Holdings, Inc.’s Definitive Proxy Statement on Schedule 14A, filed with the Securities and Exchange Commission (the “SEC”) on March 18, 2019. Southwest Gas Holdings, Inc. and its subsidiaries ~~(the “Company”) have two business segments (natural gas operations and construction services), which~~ are ~~discussed below.~~

collectively referred to as the “Company.”

Southwest is engaged in the business of purchasing, distributing, and transporting natural gas for customers in portions of Arizona, Nevada, and California. Southwest is the largest distributor of natural gas in Arizona, selling and transporting natural gas in most of central and southern Arizona, including the Phoenix and Tucson metropolitan areas. Southwest is also the largest distributor of natural gas in Nevada, serving the majority of southern Nevada, including the Las Vegas metropolitan area, and portions of northern Nevada. In addition, Southwest distributes and transports natural gas for customers in portions of California, including the Lake Tahoe area and the high desert and mountain areas in San Bernardino County.

As of ~~September 30, 2017 (on a seasonally adjusted basis),~~March 31, 2019, Southwest had ~~1,999,000~~2,058,000 residential, commercial, industrial, and other natural gas customers, of which ~~1,065,000~~1,096,000 customers were located in Arizona, ~~741,000~~765,000 in Nevada, and ~~193,000~~197,000 in California. Residential and small commercial customers represented over 99% of the total customer base. During the twelve months ended ~~September 30, 2017, 54%~~March 31, 2019, 53% of operating margin (gas operating revenues less the net cost of gas sold) was earned in Arizona, ~~35%~~36% in Nevada, and 11% in California. During this same period, Southwest earned 85% of its operating margin ~~(gas operating revenues less the net cost of gas sold)~~ from residential and small commercial customers, 3% from other sales customers, and 12% from transportation customers. These general patterns are expected to remain materially consistent for the foreseeable future.

Southwest recognizes operating revenues from the distribution and transportation of natural gas (and related services) to customers. Operating margin is a financial measure defined by management as gas operating revenues less the net cost of gas sold. However, operating margin is not specifically defined in accounting principles generally accepted in the United States (“U.S. GAAP”). Thus operating margin is considered anon-GAAP measure. Management uses this financial measure because natural gas operating revenues include the net cost of gas sold, which is a tracked cost that is passed through to customers without markup under purchased gas adjustment (“PGA”) mechanisms. Fluctuations in the net cost of gas sold impact revenues on adollar-for-dollar basis, but do not impact operating margin or operating income. Therefore, management believes operating margin provides investors and other interested parties with useful and relevant information to analyze Southwest’s financial performance in a rate-regulated environment. The principal factors affecting changes in operating margin are general rate relief (including impacts of infrastructure trackers) and customer growth.

Refer to the Summary Operating Results table for a reconciliation of revenues to operating margin.

The demand for natural gas is seasonal, with greater demand in the colder winter months and decreased demand in the warmer summer months. All of Southwest’s service territories have decoupled rate structures (alternative revenue programs), which are designed to eliminate the direct link between volumetric sales and revenue, thereby mitigating the impacts of weather variability and conservation on operating margin, allowing Southwest to pursue energy efficiency initiatives.

Centuri is a comprehensive ~~construction~~utility infrastructure services enterprise dedicated to ~~meeting the growing demands~~delivering a diverse array of solutions to North ~~American utilities, energy~~America’s gas and ~~industrial markets.~~electric providers. Centuri derives revenue from installation, replacement, repair, and maintenance of energy distribution systems, and developing industrial construction solutions. Centuri operates in 2426 major markets in the United States ~~(primarily~~(“U.S.”), primarily as ~~NPL)~~NPL, and in 32 major markets in Canada, ~~(as~~primarily as NPL ~~Canada (formerly Link-Line Contractors Ltd.~~Canada. In November 2017, Centuri expanded its operations in the northeast region of the U.S. through the acquisition of New England Utility Constructors, Inc. (“Neuco”), and ~~W.S. Nicholls)~~



	35



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		March 31, 2019

again in November 2018, in the southeast region of the U.S. through the acquisition of an 80% interest in Linetec Services, LLC (“Linetec”).

~~Construction~~ Both companies were privately owned utility infrastructure services businesses.

Utility infrastructure services activity ~~is cyclical and~~ can be ~~significantly~~ impacted by changes in ~~weather, general and local economic conditions (including the housing market), interest rates, employment levels, job growth, pipe~~infrastructure replacement programs of utilities, weather, and local and federal regulation (including tax rates and incentives). During the past few years, utilities


~~SOUTHWEST GAS HOLDINGS, INC.~~		~~Form 10-Q~~
~~SOUTHWEST GAS CORPORATION~~		~~September 30, 2017~~

have implemented or modified ~~pipeline~~system integrity management programs to enhance safety pursuant to federal and state mandates. These programs, coupled with ~~recent~~historic bonus depreciation tax deduction incentives, have resulted in a significant increase in multi-year ~~pipeline~~utility system replacement projects throughout the U.S. Generally, Centuri revenues are lowest during the first quarter of the year due to less favorable winter weather conditions. Revenues typically improve as more favorable weather conditions occur during the summer and fall months. ~~This is expected in both the U.S. and Canadian markets.~~ In certain circumstances, such as with large bid contracts (especially those of a longer duration), or unit-price contracts with revenue caps, results may be impacted by differences between costs incurred and those anticipated when the work was originally bid. Work awarded, or failing to be awarded, by individual large customers can significantly impact operating results.

This Management’s Discussion and Analysis (“MD&A”) of Financial Condition and Results of Operations should be read in conjunction with the unaudited consolidated financial statements and the notes thereto included in this Quarterly Report on Form 10-Q and the audited financial statements and the notes thereto, as well as MD&A, included in the ~~2016~~2018 Annual Report to Shareholders, which is incorporated by reference into the ~~2016~~2018 Form10-K.



	36



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		March 31, 2019

Executive Summary

The items discussed in this Executive Summary are intended to provide an overview of the results of the Company’s and Southwest’s operations. As needed, certain items are covered in greater detail in later sections of ~~management’s discussion and analysis.~~MD&A. As reflected in the table below, the natural gas operations segment accounted for an average of ~~81%~~80% oftwelve-month-to-date consolidated net income over the past two years. As such, ~~management’s discussion and analysis~~MD&A is primarily focused on that segment. Natural gas sales are seasonal, peaking during the winter months; therefore, results of operations for interim periods are not necessarily indicative of results for a full year.

Summary Operating Results

   Period Ended September 30,
   Three Months Nine Months    Twelve Months
   2017 2016 2017 2016    2017 2016
   (In thousands, except per share amounts)
Contribution to net income

Natural gas operations
   $ (4,024 ) $ (12,405 ) $ 82,436 $ 67,536    $ 134,323 $ 119,836
Construction services
   14,335 14,877 15,717 19,325    29,010 33,144
Corporate and administrative
   (107 ) —   (777 ) —      (777 ) —




Net income
   $ 10,204 $ 2,472 $ 97,376 $ 86,861    $ 162,556 $ 152,980




Average number of common shares outstanding
   47,628 47,481 47,577 47,464    47,553 47,442




Basic earnings per share

Consolidated
   $ 0.21 $ 0.05 $ 2.05 $ 1.83    $ 3.42 $ 3.22




Natural Gas Operations

Gas operating revenues
   $ 213,059 $ 200,179 $ 935,823 $ 980,927    $ 1,276,308 $ 1,376,388
Net cost of gas sold
   45,539 39,056 261,839 324,072    334,888 460,836




Operating margin
   $ 167,520 $ 161,123 $ 673,984 $ 656,855    $ 941,420 $ 915,552



	Period Ended March 31,
	Three Months						Twelve Months
	2019			2018			2019			2018
	(In thousands, except per share amounts)
Contribution to net income
Natural gas operations	$	103,389		$	90,349		$	151,882		$	170,229
Utility infrastructure services	(8,031		)	(11,001		)	47,947			34,693
Corporate and administrative	(549		)	(257		)	(1,834		)	(1,298		)
Net income	$	94,809		$	79,091		$	197,995		$	203,624

Average number of common shares	53,369			48,416			50,640			48,105
Basic earnings per share
Consolidated	$	1.78		$	1.63		$	3.91		$	4.23
Natural Gas Operations
Reconciliation of Revenue to Operating Margin (Non-GAAP measure)
Gas operating revenues	$	520,677		$	494,313		$	1,384,092		$	1,334,019
Less: Net cost of gas sold	192,604			185,732			426,260			393,898
Operating margin	$	328,073		$	308,581		$	957,832		$	940,121

1st Quarter 2019 Overview

Natural gas operations highlights:

32,000 net new customers (1.6% growth rate) during the last 12 months

Operating margin increased $19 million

Other income improved $8.3 million from returns on Company-Owned Life Insurance policies

$57 million Arizona general rate case filed in May 2019

Utility infrastructure services highlights:

Revenues increased $52.8 million (including $47.6 million from Linetec)

Quarterly net loss improved by $3 million



	37



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		~~September 30, 2017~~March 31, 2019

~~3rd Quarter 2017 Overview~~

~~Natural gas operations highlights:~~

~~Benefits of Arizona rate case reflected in quarterly operating results~~

~~32,000 net new customers in last 12 months (1.6% growth rate)~~

~~Depreciation and amortization expense declined $10 million compared to the prior-year quarter~~

~~Operating income increased $15.3 million compared to the prior-year quarter~~

~~Targeting $27 million of vintage steel pipe replacement in Arizona during 2017~~

~~Achieved 2 million natural gas utility customers in early November 2017~~

~~Construction services highlights:~~

~~Revenues increased $40.3 million compared to the prior-year quarter~~

~~Construction expenses increased $42 million compared to the prior-year quarter~~

~~Depreciation and amortization expense declined $1.1 million compared to the prior-year quarter~~

~~The Company acquired the residual 3.4% interest in Centuri in August 2017~~

~~Southwest Gas Holdings highlights:~~

~~Amended and restated bylaws to eliminate cumulative voting and enact majority voting~~


~~SOUTHWEST GAS HOLDINGS, INC.~~		~~Form 10-Q~~
~~SOUTHWEST GAS CORPORATION~~		~~September 30, 2017~~

Results of Natural Gas Operations

   Three Months Ended
September 30,
   2017    2016
   (Thousands of dollars)
Gas operating revenues
   $ 213,059    $ 200,179
Net cost of gas sold
   45,539    39,056




Operating margin
   167,520    161,123
Operations and maintenance expense
   102,215    102,438
Depreciation and amortization
   46,194    56,436
Taxes other than income taxes
   14,046    12,480




Operating income (loss)
   5,065    (10,231 )
Other income (deductions)
   3,081    2,521
Net interest deductions
   17,421    16,364




Income (loss) before income taxes
   (9,275 )    (24,074 )
Income tax expense (benefit)
   (5,251 )    (11,669 )




Contribution to consolidated net income (loss)
   $ (4,024 )    $ (12,405 )

Quarterly Analysis



	Three Months Ended
	March 31,
	2019		2018
	(Thousands of dollars)
Gas operating revenues	$	520,677	$	494,313
Net cost of gas sold	192,604		185,732
Operating margin	328,073		308,581
Operations and maintenance expense	105,542		102,190
Depreciation and amortization	57,612		49,961
Taxes other than income taxes	16,206		15,257
Operating income	148,713		141,173
Other income (deductions)	5,946		(4,603		)
Net interest deductions	23,099		19,255
Income before income taxes	131,560		117,315
Income tax expense	28,171		26,966
Contribution to consolidated net income	$	103,389	$	90,349

Contribution from natural gas operations to consolidated net income increased $13 million between the first quarters of 2019 and 2018. The increase was primarily due to rate relief, customer growth, and higher Other income (deductions), partially offset by an increase in Operations and maintenance expense, Depreciation and amortization, and Net interest deductions.

Operating margin increased $6$19 million, ~~between quarters. Rate relief in Arizona (effective April 2017) and California provided~~including a $4 million ~~in operating margin (see~~~~Rates and Regulatory Proceedings~~~~). Approximately $2 million in increased operating margin was~~increase attributable to customer growth, as 32,000 net new customers were added during the last twelve months.

Rate relief in California and Nevada added an additional $4 million in operating margin. The current quarter includes a $4 million improvement as reserves for the regulatory impacts of tax reform were recognized in the prior-year quarter. The remaining increase includes the combined impact of surcharge recoveries for infrastructure replacement programs and other mechanisms, and changes in other miscellaneous revenues and margin from customers outside the decoupling mechanisms, offset by a $4.7 million one-time adjustment by the Arizona Corporation Commission (“ACC”) to reflect the impacts of U.S. tax reform on the Arizona decoupling mechanism.

Operations and maintenance expense ~~was relatively flat~~increased $3.4 million, or 3%, between quarters. ~~Decreases in employee-related benefit costs more than offset increases in~~Higher pipeline integrity management and damage prevention programs and other general ~~costs.~~

cost increases were mitigated by decreases in pension and medical costs between quarters.

Depreciation and amortization expense ~~decreased $10~~increased $7.7 million between quarters primarily due to ~~reduced depreciation rates in Arizona,~~regulatory account amortization, notably from California Public Purpose and environmental programs (approximately $5 million combined), and due to a ~~result of the recent Arizona general rate case decision. Partially offsetting the decline was increased depreciation associated with a $317~~$527 million, or 5%8%, increase in average gas plant in service for the current quarter as compared to the corresponding quarter a year ago. The increase in gas plant was attributable to pipeline capacity reinforcement work, franchise requirements, scheduled and accelerated pipe replacement activities, and new infrastructure.

~~Taxes other than~~

Other income ~~taxes increased $1.6~~(deductions) improved $10.5 million between quarters primarily due to higher property taxes associated with net plant additions and increased property taxes in Arizona, including the impact of a property tax tracking mechanism enacted as part of the recently settled Arizona general rate case.

~~Other income increased $560,000 between quarters primarily due to~~ an increase in the equity portion of the allowance for funds used during construction (“AFUDC”) associated with higher construction expenditures. The equity portion of AFUDC represents the cost of equity funds used to finance utility construction. The equity AFUDC improvement was partially offset by a decline between quarters in income from company-owned life insurance (“COLI”) policies. The current quarter reflects ~~$2.1~~a $7.6 million ~~of income associated with~~increase in COLI policy cash surrender ~~value increases,~~values, while the prior-year quarter reflected ~~$2.3~~a $700,000 COLI-related loss. The non-service cost components of employee pension and other postretirement benefits improved $1.5 million ~~of COLI-related income. COLI amounts in each quarter were greater than expected.~~

between quarters.

Net interest deductions increased ~~$1.1~~$3.8 million ~~between quarters,~~in the first quarter of 2019, as compared to the prior-year quarter, primarily due to the ~~September 2016~~ issuance of $300 million of senior notes ~~partially offset by reductions associated with~~in March 2018, higher borrowings outstanding under the ~~redemption of debt ($24.9 million of 4.75% IDRBs in September 2016)~~revolving credit and ~~lower interest expense associated with~~term-loan facility, and carrying cost on PGA balances ~~as compared to~~payable in the ~~prior-year~~current quarter.



	38



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		~~September 30, 2017~~March 31, 2019

Results of Natural Gas Operations

~~Nine-Month~~

Twelve-Month Analysis

   Nine Months Ended September 30,
   2017    2016
   (Thousands of dollars)
Gas operating revenues
   $ 935,823    $ 980,927
Net cost of gas sold
   261,839    324,072




Operating margin
   673,984    656,855
Operations and maintenance expense
   313,395    301,979
Depreciation and amortization
   153,643    174,413
Taxes other than income taxes
   43,325    39,480




Operating income
   163,621    140,983
Other income (deductions)
   8,744    6,712
Net interest deductions
   51,622    49,155




Income before income taxes
   120,743    98,540
Income tax expense
   38,307    31,004




Contribution to consolidated net income
   $ 82,436    $ 67,536

~~The contribution~~



	Twelve Months Ended
	March 31,
	2019			2018
	(Thousands of dollars)
Gas operating revenues	$	1,384,092		$	1,334,019
Net cost of gas sold	426,260			393,898
Operating margin	957,832			940,121
Operations and maintenance expense	408,165			389,687
Depreciation and amortization	199,467			190,688
Taxes other than income taxes	60,847			58,421
Operating income	289,353			301,325
Other income (deductions)	(6,691		)	(9,747		)
Net interest deductions	85,584			71,778
Income before income taxes	197,078			219,800
Income tax expense	45,196			49,571
Contribution to consolidated net income	$	151,882		$	170,229

Contribution to consolidated net income from natural gas operations ~~increased $14.9~~decreased by $18.3 million between the ~~first nine months~~twelve-month periods of ~~2017~~2019 and ~~2016.~~2018. The ~~improvement~~decrease was primarily due to higher ~~operating margin~~Operations and ~~lower depreciation~~maintenance expense, Net interest deductions, and Depreciation and amortization expense, partially offset by ~~an increase in operations~~rate relief and ~~maintenance expenses.~~

lower Income tax expense.

Operating margin increased ~~$17~~$18 million between ~~the comparative nine-month~~ periods. ~~Rate~~Customer growth provided $11 million and combined rate relief in ~~the Arizona~~Nevada and California ~~jurisdictions~~ provided ~~$10~~$5 million of incremental operating margin. The remaining increase in operating margin ~~(see~~~~Rates~~includes recoveries of regulatory assets, infrastructure replacement mechanisms, customers outside the decoupling mechanisms, and ~~Regulatory Proceedings~~~~). The remaining $7 million increase was attributable to customer growth.~~

other miscellaneous revenues, net of reserve and related regulatory adjustments associated with the impacts of U.S. tax reform.

Operations and maintenance expense increased $11.4 million, or 4%, between periods due primarily to higher general cost increases. Approximately $5 million of the incremental costs recognized were associated with the amount and timing of employee incentive plan grants (including accelerated recognition for retirement eligible employees).

~~Depreciation and amortization expense decreased $20.8~~$18.5 million between periods primarily due to ~~reduced depreciation rates~~higher technology, administrative and other general cost increases. Included in ~~Arizona,~~the increase were pension-related service cost and expenditures for pipeline damage prevention programs, which increased $3 million and $3.5 million, respectively.

Depreciation and amortization expense increased $8.8 million between periods primarily due to a result of the recent Arizona general rate case decision. The depreciation decrease also included a decline of approximately $3.7 million in amortization related to the recovery of regulatory assets. Partially offsetting these declines was depreciation associated with a $325$487 million, or 5%8%, increase in average gas plant in service for the current period as compared to the prior period. The increase reflects an offsetting reduction in ~~gas plant was attributable to pipeline capacity reinforcement work, franchise requirements, scheduled and accelerated pipe replacement activities, and new infrastructure.~~

regulatory amortization between periods of approximately $1 million.

Taxes other than income taxes increased ~~$3.8~~$2.4 million, or 4%, between periods primarily due to higher property taxes associated with net plant ~~additions and increased property taxes in Arizona, including the impact of the Arizona property tax tracking mechanism.~~

additions.

Other income ~~which principally includes returns on COLI policies andnon-utility~~ expenses, increased $2 million between periods. The current period reflects $6.8 million of income associated with COLI policy cash surrender value increases, while the prior-year period reflected $5.4 million of COLI-related income. COLI amounts in each period were greater than expected.

Net interest deductions increased $2.5 million between periods, primarily due to the September 2016 issuance of $300 million of senior notes, partially offset by reductions associated with debt redemptions ($100 million of 4.85% IDRBs in July 2016 and $24.9 million of 4.75% IDRBs in September 2016) and lower interest expense associated with PGA balances as compared to the prior-year period.


~~SOUTHWEST GAS HOLDINGS, INC.~~		~~Form 10-Q~~
~~SOUTHWEST GAS CORPORATION~~		~~September 30, 2017~~

~~Results of Natural Gas Operations~~

~~Twelve-Month Analysis~~

   Twelve Months Ended September 30,
   2017    2016
   (Thousands of dollars)
Gas operating revenues
   $ 1,276,308    $ 1,376,388
Net cost of gas sold
   334,888    460,836




Operating margin
   941,420    915,552
Operations and maintenance expense
   413,140    400,222
Depreciation and amortization
   212,693    228,609
Taxes other than income taxes
   56,221    51,810




Operating income
   259,366    234,911
Other income (deductions)
   10,308    9,615
Net interest deductions
   69,464    65,146




Income before income taxes
   200,210    179,380
Income tax expense
   65,887    59,544




Contribution to consolidated net income
   $ 134,323    $ 119,836

~~Contribution to consolidated net income from natural gas operations increased by $14.5~~(deductions) improved $3.1 million between the twelve-month periods of ~~2017~~2019 and ~~2016. The improvement was~~2018 primarily due to ~~higher operating margin and lower depreciation expense, partially offset by~~ an increase in ~~operations~~interest income related to the Gas Infrastructure Replacement (“GIR”) mechanism in Nevada and ~~maintenance expenses~~the equity component of the allowance for funds used during construction (“AFUDC”) due to greater construction expenditures and ~~interest expense.~~

~~Operating margin increased $26 million between periods including a combined $13 million of rate relief~~higher AFUDC rates in the ~~Arizona~~current period. Income from changes in the cash surrender value of COLI policies and ~~California jurisdictions, as well as Paiute Pipeline Company. Customer growth provided $9~~net death benefits was $5.1 million in operating margin, while operating margin associated with recoveries of regulatory assets, infrastructure replacement mechanisms, customers outside the decoupling mechanisms, and other miscellaneous revenues improved $4 million.

Operations and maintenance expense increased $12.9 million, or 3%, between periods primarily due to general cost increases, partially offset by lower pension expense. Approximately $5.6 million of the incremental costs recognized were associated with the amount and timing of employee incentive plan grants (including accelerated recognition for retirement-eligible employees). Pipeline integrity management and damage prevention programs collectively increased $500,000.

Depreciation and amortization expense decreased $15.9 million between periods primarily due to reduced depreciation rates in Arizona, a result of the recent Arizona general rate case decision. Partially offsetting the decline was depreciation associated with a $335 million, or 6%, increase in average gas plant in service for the current period ~~as compared to~~and $6.8 million in the ~~prior~~prior-year period. ~~The increase in gas plant was attributable to pipeline capacity reinforcement work, franchise requirements, scheduled and accelerated pipe replacement activities, and new infrastructure.~~

~~Taxes other than income taxes~~

Net interest deductions increased ~~$4.4~~$13.8 million between periods primarily due to higher ~~property taxes~~interest associated ~~primarily~~ with ~~net plant additions and increased property taxes in Arizona, including the impact of a property tax regulatory tracking mechanism resulting from the recent Arizona general rate case.~~

Other income increased $693,000 between the twelve-month periods of 2017 and 2016. The current period reflects an $8.8 million increase in COLI policy cash surrender values, while the prior-year period reflected $7.5 million of combined COLI-related income and recognized death benefits. COLI amounts in each period were greater than expected.

~~Net interest deductions increased $4.3 million between periods, primarily due to the September 2016~~ issuance of the $300 million of senior ~~notes. The increase was partially offset by reductions associated with the redemption of debt ($100 million of 4.85% IDRBs~~notes in ~~July 2016~~March 2018, higher credit facility borrowings, and ~~$24.9 million of 4.75% IDRBs in September 2016) and lower interest expense associated with~~impacts from PGA balances ~~as compared to~~payable in the ~~prior-year~~current period.



	39



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		~~September 30, 2017~~March 31, 2019

Results of ~~Construction~~Utility Infrastructure Services

Quarterly Analysis

   Three Months Ended
September 30,
   2017    2016
   (Thousands of dollars)
Construction revenues
   $ 380,094    $ 339,790
Operating expenses:

Construction expenses
   342,629    300,611
Depreciation and amortization
   12,335    13,409




Operating income
   25,130    25,770
Other income (deductions)
   (210 )    44
Net interest deductions
   1,962    1,794




Income before income taxes
   22,958    24,020
Income tax expense
   8,407    8,708




Net income
   14,551    15,312
Net income attributable to noncontrolling interests
   216    435




Contribution to consolidated net income attributable to Centuri
   $ 14,335    $ 14,877

~~Contribution to consolidated~~



	Three Months Ended
	March 31,
	2019			2018
	(Thousands of dollars)
Utility infrastructure services revenues	$	312,862		$	260,017
Operating expenses:
Utility infrastructure services expenses	300,465			258,952
Depreciation and amortization	19,927			12,517
Operating income (loss)	(7,530		)	(11,452		)
Other income (deductions)	875			263
Net interest deductions	3,269			3,196
Loss before income taxes	(9,924		)	(14,385		)
Income tax benefit	(2,468		)	(2,587		)
Net loss	(7,456		)	(11,798		)
Net income (loss) attributable to noncontrolling interest	575			(797		)
Contribution to consolidated net income (loss) attributable to Centuri	$	(8,031	)	$	(11,001	)

In November 2018, Centuri acquired Linetec. The table above, therefore, includes results for Linetec only in the 2019 period, including $47.6 million of revenue and $2.3 million of net income ~~from construction~~attributable to Linetec in 2019.

Utility infrastructure services revenues increased $52.8 million in the ~~current~~first quarter ~~decreased by $542,000~~of 2019 when compared to the prior-year ~~quarter. The decrease is~~quarter, primarily due to the $47.6 million of revenues contributed by Linetec, in addition to a higher ~~construction costs relative to increased revenues, resulting from apre-tax~~ ~~loss on a project described below, partially offset by a decline in depreciation and amortization.~~

~~Revenues increased $40.3 million, or 12%, between quarters primarily due to an increase in~~volume of pipe replacement work ~~with existing customers. A significant portion of the increase relates to~~under blanket and bid ~~jobs that are expected to be substantially complete by year end.~~

~~Construction~~contracts.

Utility infrastructure services expenses increased ~~$42~~$41.5 million ~~or 14%, between quarters~~in the first quarter of 2019 when compared to the prior-year quarter due to $37.9 million of Linetec expenses and costs to complete additional pipe replacement ~~work. Results were negatively impacted by~~work, in addition to higher ~~construction~~labor-related costs ~~for a water pipe replacement project, for which Centuri has requested increased cost recovery. No additional~~incurred to complete work ~~orders will be accepted on~~during inclement weather conditions in the ~~project pending resolution of Centuri’s request. Gains~~current-year quarter. Net gains on sale of equipment (reflected as an offset to ~~construction~~Utility infrastructure services expenses) were approximately ~~$25,000 and $1.4 million~~$200,000 for each of the ~~third~~first quarters of ~~2017~~2019 and ~~2016, respectively.~~

2018.

Depreciation and amortization ~~decreased $1.1~~expense increased $7.4 million between ~~quarters, primarily~~quarters. Approximately $5.7 million of the increase is due to ~~a $2~~the Linetec acquisition, including amortization of finite-lived intangible assets and depreciation of property and equipment of $900,000 and $4.8 million, ~~reduction associated with~~respectively, for the ~~extension of the estimated useful lives of certain depreciable equipment during the past 12 months, partially offset by an~~first quarter 2019. The remaining increase in depreciation ~~for~~was attributable to additional equipment purchased to support the growing volume of work being performed.

Net interest deductions increased by $73,000 between quarters due primarily to higher average debt outstanding under the existing $590 million secured revolving credit and term loan facility in 2019.



	40



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		~~September 30, 2017~~March 31, 2019

Results of ~~Construction~~Utility Infrastructure Services

~~Nine-Month~~

Twelve-Month Analysis

   Nine Months Ended
September 30,
   2017    2016
   (Thousands of dollars)
Construction revenues
   $ 872,536    $ 838,038
Operating expenses:

Construction expenses
   806,586    757,919
Depreciation and amortization
   35,446    43,351




Operating income
   30,504    36,768
Other income (deductions)
   38    44
Net interest deductions
   5,095    4,945




Income before income taxes
   25,447    31,867
Income tax expense
   9,560    12,042




Net income
   15,887    19,825
Net income attributable to noncontrolling interests
   170    500




Contribution to consolidated net income attributable to Centuri
   $ 15,717    $ 19,325

~~Contribution to consolidated~~



	Twelve Months Ended
	March 31,
	2019		2018
	(Thousands of dollars)
Utility infrastructure services revenues	$	1,575,130	$	1,314,366
Operating expenses:
Utility infrastructure services expenses	1,429,202		1,215,959
Depreciation and amortization	64,806		50,263
Operating income	81,122		48,144
Other income (deductions)	374		354
Net interest deductions	14,263		9,678
Income before income taxes	67,233		38,820
Income tax expense	18,539		4,520
Net income	48,694		34,300
Net income (loss) attributable to noncontrolling interest	747		(393		)
Contribution to consolidated net income attributable to Centuri	$	47,947	$	34,693

Results for Linetec have been included in the table above during the period following the November 2018 acquisition date, including $61.7 million of revenue and $3 million of net income ~~from construction~~reflected in the twelve-month period ending in March 2019. Furthermore, in November 2017, Centuri acquired Neuco. Results for Neuco have been included following its acquisition date, including $155.4 million and $31.2 million of revenues, and $28.5 million and $1.5 million of net income, in each case, respectively, during the comparative twelve-month periods ending in March 2019 and 2018.

Utility infrastructure services ~~for~~revenues increased $260.8 million overall in the ~~first nine months of 2017 declined by $3.6 million when~~current twelve-month period compared to the ~~prior-year period. The decrease is~~same period of 2018, primarily due to ~~higher construction costs relative~~the combined $185.9 million in incremental revenue noted above for Linetec and Neuco, and to continued growth with existing customers under existing master service and bid agreements. In addition, revenue was favorably impacted year over year by certain non-routine projects with customers.

Utility infrastructure services expenses increased ~~revenues, partially offset by a decline in depreciation and amortization.~~

~~Revenues increased $34.5~~$213.2 million ~~or 4%, in the first nine months of 2017 when compared to the prior-year period~~between periods, primarily due to ~~increased~~related expenses for Linetec and Neuco of $48.1 million and $78.6 million, respectively, and additional pipe replacement ~~work. Partially offsetting increases~~work and higher labor-related operating expenses to support growth in revenues was a temporary work stoppage by a significant customer that began in the first quarter of 2017 and continued through part of the second quarter of 2017 resulting in a $26.3 million reduction in revenues, compared to the prior-year period, and a $3.7 million~~pre-tax~~ loss in the current nine-month period. The temporary work stoppage was initiated due to state-mandated requalification of employees of all contractors working within the jurisdictional boundary of one state. Operations resumed gradually following the requalification of Centuri’s employees during the second quarter of 2017. Additionally, inclement weather in several operating areas negatively impacted revenues and reduced productivity in the first quarter of 2017.

Construction expenses increased $48.7 million, or 6%, between periods. The increase in construction expenses is disproportionate to revenues noted above due in part to logistics surrounding the timing and length of the temporary work stoppage with the significant customer and to higher labor costs incurred to complete work during inclement weather conditions in the first quarter. In addition, results were negatively impacted by higher construction and~~start-up~~ ~~costs related to the water pipe replacement project, for which Centuri is pursuing cost recovery. Gains~~operations. Net gains on sale of equipment (reflected as an offset to ~~construction~~Utility infrastructure services expenses) were ~~approximately $1.5~~$1.7 million and $4.1 million for the ~~first nine months~~twelve-month periods of ~~2017~~2019 and ~~2016,~~2018, respectively.

Depreciation and amortization ~~decreased $7.9~~expense increased $14.5 million between ~~periods, primarily due~~the current and prior-year periods. The increase was attributable to ~~an $8.2 million reduction in~~the incremental depreciation ~~associated with the extension~~and amortization related to certain tangible and intangible assets recognized as a result of the ~~estimated useful lives of certain depreciable equipment during the past 12 months, partially offset by an increase in~~Linetec and Neuco acquisitions, as well as increased depreciation ~~for~~on additional property and equipment purchased to support the growing volume of work being performed.

Net interest deductions increased $5 million between periods due primarily to interest expense and amortization of debt issuance costs associated with incremental borrowings under the $590 million secured revolving credit and term loan facility (primarily related to the Neuco and Linetec acquisitions).

Income tax expense during the twelve-month period ending March 31, 2018 was favorably impacted by approximately $12 million of one-time tax benefits related to the remeasurement of Centuri’s deferred tax liabilities when U.S. tax reform was enacted in December 2017.



	41



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		~~September 30, 2017~~March 31, 2019

~~Results of Construction Services~~

~~Twelve-Month Analysis~~

   Twelve Months Ended
September 30,
   2017    2016
   (Thousands of dollars)
Construction revenues
   $ 1,173,576    $ 1,127,982
Operating expenses:

Construction expenses
   1,073,090    1,009,188
Depreciation and amortization
   47,764    58,368




Operating income
   52,722    60,426
Other income (deductions)
   1,187    1,246
Net interest deductions
   6,813    6,738




Income before income taxes
   47,096    54,934
Income tax expense
   17,402    20,711




Net income
   29,694    34,223
Net income attributable to noncontrolling interests
   684    1,079




Contribution to consolidated net income attributable to Centuri
   $ 29,010    $ 33,144

Contribution to consolidated net income from construction services for the twelve-month period ended September 30, 2017 decreased $4.1 million compared to the same period of 2016. The decrease is primarily due to higher construction costs relative to increased revenues, resulting in~~pre-tax~~ ~~losses on certain projects, partially offset by a decline in depreciation and amortization.~~

Revenues increased $45.6 million, or 4%, in the current twelve-month period compared to the same period of 2016 primarily due to additional pipe replacement work for existing natural gas distribution customers. During the past several years, Centuri has focused its efforts on obtaining replacement work under both blanket contracts and incremental bid projects. For both twelve-month periods ended September 30, 2017 and 2016, revenues from replacement work provided over 60% of total revenues.

Construction expenses increased $63.9 million, or 6%, between periods, due to additional pipe replacement work, higher labor costs experienced due to changes in the mix of work with existing customers, and higher operating expenses to support increased growth in operations. The logistics surrounding the timing and length of a temporary work stoppage with a significant customer during the first six months of 2017 and higher labor costs incurred to complete work during inclement weather conditions in the first quarter of 2017 resulted in costs disproportionate to revenues. Results were negatively impacted by higher~~start-up~~ and construction costs for a water pipe replacement project, for which Centuri has requested increased cost recovery. No additional work orders will be accepted on the project pending resolution of Centuri’s request. Gains on sale of equipment (reflected as an offset to construction expenses) were $4.5 million and $4.2 million for the twelve-month periods ended September 30, 2017 and 2016, respectively.

Depreciation and amortization decreased $10.6 million between the current and prior-year periods primarily due to an $11.1 million reduction associated with the extension of the estimated useful lives of certain depreciable equipment over the last twelve months, partially offset by an increase in depreciation for additional equipment purchased to support the growing volume of work being performed.


~~SOUTHWEST GAS HOLDINGS, INC.~~		~~Form 10-Q~~
~~SOUTHWEST GAS CORPORATION~~		~~September 30, 2017~~

Rates and Regulatory Proceedings

~~Arizona Jurisdiction~~

~~Arizona General Rate Case.~~

Southwest ~~filed a general rate application with~~is subject to the regulation of the Arizona Corporation Commission ~~(“ACC”~~(the “ACC”), the Public Utilities Commission of Nevada (the “PUCN”), the California Public Utilities Commission (the “CPUC”), and the Federal Energy Regulatory Commission (the “FERC”).

General Rate Relief and Rate Design

Rates charged to customers vary according to customer class and rate jurisdiction and are set by the individual state and federal regulatory commissions that govern Southwest’s service territories. Southwest makes periodic filings for rate adjustments as the cost of providing service (including the cost of natural gas purchased) changes, and as additional investments in new or replacement pipeline and related facilities are made. Rates are intended to provide for recovery of all commission-approved costs and provide a reasonable return on investment. The mix of fixed and variable components in rates assigned to various customer classes (rate design) can significantly impact the operating margin actually realized by Southwest. Management has worked with its regulatory commissions in designing rate structures that strive to provide affordable and reliable service to its customers while mitigating the volatility in prices to customers and stabilizing returns to investors. Such rate structures were in place in all of Southwest’s operating areas during all periods for which results of natural gas operations are disclosed above.

Arizona Jurisdiction

Arizona General Rate Case. On March 18, 2019, Southwest filed its Notice of Intent to file a new general rate application, which was filed in May ~~2016 requesting~~2019. In this latest application, Southwest requests to update rates to reflect recent U.S. tax reform, including the flow back of approximately $20.6 million of excess deferred income taxes and to update the cost of service to consider, among other things, capital investments of approximately $670 million, including post-test year additions for, among other things, the southern Arizona LNG facility discussed below. Overall, the request includes an increase in ~~authorized annual operating revenues~~revenue of approximately ~~$32~~$57 million, or 4.2%, to reflect existing levels of expense and requested returns, in addition to reflecting capital investments made by Southwest since June 2010. The application requested an overall rate of return of 7.82% on an original cost rate base of $1.336 billion,including a ~~10.25%~~proposed 10.3% return on ~~common~~ equity ~~and~~relative to a capital structure ~~utilizing 52% common~~of 51.1% equity. The ~~filing included~~request also includes the retention of a ~~depreciation study that supported~~decoupled rate design, previously approved regulatory mechanisms, and a new infrastructure tracking mechanism for specific plastic pipe. The request also includes a proposal for a renewable natural gas program that authorizes Southwest to ~~reduce currently~~purchase renewable natural gas for its customers and to recover the cost as part of its purchased gas adjustment mechanism.

Delivery Charge Adjustment. The annual Delivery Charge Adjustment (“DCA”) rate adjustment is filed each April, which along with other reporting requirements, contemplates a rate to recover the over- or under-collected margin tracker amounts based on the balance at the end of the preceding calendar year. The DCA rate adjustment filed in April 2018 reflected the December 31, 2017 balance of approximately $40 million. Following a brief administrative delay, Southwest updated its request to instead include the balance at December 31, 2018 of $73 million. The ACC approved a surcharge to recover approximately $69 million, the difference of which relates to a one-time modification to reflect one-time benefits attributable to the impact of recent landmark U.S. tax reform on the decoupled balance existing at the enactment date of such reform. The updated rate will replace the existing rate effective ~~depreciation expense by approximately $42 million, which was considered~~May 1, 2019.

Tax Reform. In February 2018, the ACC directed all Arizona utilities to address tax savings from the enactment of U.S. tax reform beginning January 1, 2018 through one of various means. In April 2018, Southwest filed an application with the ACC, requesting approval for a tax refund process or, in the ~~overall requested amount. This expense reduction coupled~~alternative, the authority to file a general rate case to reflect tax reform. Ultimately, Southwest was instructed to refund customers a one-time credit to reflect the tax savings from January through July 2018, effective with Southwest’s August 2018 billing cycles. In addition, effective August 2018, per-therm surcredits were established and will be effective until new cost-of-service rates are implemented following the conclusion of the general rate case filed in May 2019. These undertakings are expected to refund $20 million annually, as compared to rate levels established in the previously concluded general rate case effective April 2017. Through March 2019, Southwest has reflected relevant proportional amounts associated with the ~~requested~~annualized $20 million as a reduction in revenue ~~increase,~~and is tracking monthly differences between amounts expected to be returned and amounts actually returned to customers, which has resulted in a ~~net annual operating income increase request~~liability balance of ~~$74 million. A settlement was reached among several parties in December 2016 and a formal draft settlement was filed in January 2017. Hearings were held in February 2017, and~~$1.5 million as of March 31, 2019. See related discussion above with regard to the ACC approved the settlement agreement in April 2017. The settlement provides for an overall operating revenue increase of $16 million and the capital structure and cost of capital as proposed by Southwest, with the exception of the return on common equity, which was set at 9.50%. Depreciation expense is expected to be reduced by $44.7 million, for a combined net annual operating income increase of $60.7 million. Other key elements of the settlement include approval of the continuation and expansion of the current Customer-Owned Yard Line (“COYL”) program (adding the ability to seek out COYLs through a targeted approach and mobilization of work crews for replacement), implementation of a vintage steel pipe replacement program, and a continuation of the current decoupled rate design, excluding a winter-period adjustment to rates, making the mechanism fundamentally similar to that which exists in Nevada. The settlement also included a property tax tracking mechanism to defer changes in property tax expense for recovery or return in the next general rate case. New rates were effective April 2017. The settlement also includes a three-year rate case moratorium prohibiting a new application to adjust base rates from being filed prior to May 2019.

~~LNG (“~~DCA.

Liquefied Natural ~~Gas”~~Gas (“LNG”) Facility. In January 2014, Southwest filed an application with the ACC seeking preapproval to construct, operate, and maintain a 233,000 dekatherm LNG facility in southern Arizona. This facility is intended to enhance service reliability and flexibility inrelated to natural gas deliveries in the southern Arizona area by providing a local storage option, to be operated by Southwest and connected directly to its distribution system. In December 2014, Southwest received an order from the ACC granting~~pre-approval~~ preapproval of ~~Southwest’s application to construct~~ the ~~LNG facility~~construction and ~~the~~ deferral of costs, up to $50 ~~million. Following the December 2014 preapproval, Southwest purchased the site for the facility~~million, which was later approved (December 2016) to be modified not to exceed $80 million, following land purchase and ~~completed detailed engineering design specifications for the purpose of soliciting bids~~bid solicitation for the engineering, procurement, and construction ~~(“EPC”)~~ of the facility. ~~Southwest solicited requests for proposals for~~Construction began during the ~~EPC phase~~third quarter of 2017 and is expected to be substantially complete in the ~~project, and in October 2016 made a filing~~second quarter of 2019 with the ~~ACC to modify~~facility available for use during the ~~previously issued Order to update thepre-approved~~ ~~costs to reflect anot-to-exceed~~ ~~amount~~winter of ~~$80 million, which was approved by the ACC in December 2016.~~2019/2020. Through ~~September 2017,~~March 2019, Southwest has incurred approximately ~~$21.7~~$64 million in capital expenditures toward the project (including land acquisition costs). ~~Construction commenced during the third quarter of 2017 and is expected to be completed by the end of 2019.~~



	42



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		March 31, 2019

COYL Program. Southwest received approval, in connection with ~~an earlier~~its 2010 Arizona general rate case, to implement a program to conduct leak surveys, and if leaks were present, to replace and relocate service lines and meters for Arizona customers whose meters were set off from the customer’s home, ~~which is not~~representing a ~~traditional~~non-traditional configuration. ~~Customers with this configuration were previously responsible for~~“Phase II” of the ~~cost~~COYL program included the replacement of ~~maintaining these lines and were subject to the immediate cessation of natural gas service iflow-pressure~~ ~~leaks occurred. Effective June 2013, the ACC authorized a surcharge to recover the costs of depreciation andpre-tax~~ ~~return on the costs incurred to replace and relocate service lines and meters.~~non-leaking COYLs. The surcharge is revised annually as the program progresses. In ~~2014, Southwest received approval to add a “Phase II” component to~~ the ~~COYL program to include the replacement ofnon-leaking~~ ~~COYLs. In the most recent~~ annual ~~COYL~~ filing made in February ~~2017,~~2019, Southwest requested to ~~establish an annual~~increase its surcharge ~~to collect $1.8~~revenue by $3.2 million (to $6.7 million overall) related to the revenue requirement associated with ~~$12.1~~$26.6 million in capital projects completed under both ~~Phase I and Phase II~~phases during ~~2016. In June 2017,~~2018. The surcharge application is expected to be considered by the ACC ~~issued a decision approving~~in the surcharge application. All capital work completed in earlier years was incorporated in Southwest’s Arizona rate base in connection with the recently completed general rate case proceeding, as discussed above.


~~SOUTHWEST GAS HOLDINGS, INC.~~		~~Form 10-Q~~
~~SOUTHWEST GAS CORPORATION~~		~~September 30, 2017~~

third quarter of 2019.

Vintage Steel Pipe ~~Program~~.(“VSP”) Program. Southwest received approval, in connection with its ~~most recent~~2016 Arizona general rate case, to implement a ~~vintage steel pipe (“VSP”)~~VSP replacement program. Southwest currently has approximately 6,000 miles ofpre-1970s vintage steel pipe in Arizona. Southwest proposed to start replacing the pipe on an accelerated basis and to recover the costs through an annual surcharge filing that ~~will be~~is made in February of each year. The surcharge is designed to be revised annually as the program progresses. ~~A Plan~~Southwest replaced approximately 119 miles of ~~Administration (“POA”),~~vintage steel pipe during 2018 totaling approximately $100 million, and is targeting a similar amount for projects during 2019. In the February 2019 VSP filing, Southwest requested to increase its surcharge revenue by $9.5 million (to $11.9 million) related to 2018 expenditures. The surcharge application is expected to be considered by the ACC in the third quarter of 2019.

Customer Data Modernization Initiative. Southwest is embarking on an initiative to replace both its customer service system and gas transaction system, which ~~was~~are referred to as the Customer Data Modernization Initiative (the “CDMI”). In March 2019, Southwest filed ~~in March~~an application with the ACC seeking an accounting order which, if approved, would authorize Southwest to track and defer all costs associated with the CDMI to mitigate adverse financial implications associated with this significant multi-year project. Total cost for the CDMI is an estimated $174 million, approximately $96 million of ~~2017 and was approved in conjunction with~~which would be allocable to the Arizona rate jurisdiction. The initiative is currently expected to be completed during the third quarter of 2021. Resolution of this request is expected before the end of 2019.

California Jurisdiction

California General Rate Case. As part of the most recent Southwest general rate case ~~outlined~~application, with rates effective June 2014, the ~~VSP program requirements and established the timeline for future project plans and surcharge requests. Southwest is currently targeting the replacement~~CPUC authorized an overall revenue increase of ~~nearly 40 miles of VSP during 2017 totaling approximately $27~~$7.1 million, ~~and replacement projects during 2018 of approximately $100 million.~~

~~California Jurisdiction~~

~~Attrition Filing.~~ ~~In November 2016, Southwest made its latest annual post-test year~~a Post-Test Year (“PTY”) Ratemaking Mechanism, which allowed for attrition ~~filing with the California Public Utilities Commission (“CPUC”), requesting annual revenue~~ increases of ~~$2.1 million in southern California, $513,000 in northern California,~~2.75% annually for 2015 to 2018, a depreciation reduction as requested, a limited COYL inspection program for schools, and ~~$256,000 for South Lake Tahoe. This filing was approved in December 2016~~an Infrastructure Reliability and ~~rates were made effective in January 2017. At the same time, rates were updated~~Replacement Adjustment Mechanism (“IRRAM”) to recover the ~~regulatory asset~~costs associated with the ~~revenue decoupling mechanism, or margin tracker.~~

~~California General Rate Case~~. new limited COYL program. The CPUC decision also provided for a two-way pension balancing account to track differences between authorized and actual pension funding amounts.

In December 2016, Southwest filed to modify the most recent general rate case decision to extend the current rate case cycle by two years, including extension of the annual 2.75% PTY attrition adjustments ~~through~~for 2019 and 2020, ~~from 2018. That latest~~which was approved by the CPUC in June 2017. Southwest expects to file a general rate case application in the third quarter of 2019.

Tax Reform. In its 2017 decision ~~would have required Southwest~~approving Southwest’s request to ~~file~~extend the filing date of its next general rate ~~application by September 2017. Expedited consideration was requested and in June 2017,~~case, the CPUC ~~approved~~also directed Southwest to track income tax expenses resulting from mandatory or elective changes in tax law, procedure, or policy. The purpose is to identify differences between Southwest’s authorized income tax expenses and its actual incurred income tax expenses, the ~~request, thereby extending~~result of which would be reviewed in Southwest’s next general rate case. During the first quarter of 2019, Southwest reflected $1.8 million as a reserve for amounts attributable to the impact of U.S. tax reform on the ratemaking revenue requirement. Excluding advance requested or required procedural changes, Southwest does not currently anticipate making an ad hoc filing in advance of the next general rate case filing ~~deadline.~~to implement rate changes resulting from U.S. tax reform.

Attrition Filing. In November 2018, Southwest believes this extension is in the public interest as it provides rate stability to customers for two additional years consistent with the current reasonable rates approved as part of the last general rate case, and the current revenue requirement and rate of return are not in need of adjustment (with the continuation of the currently approved 2.75%made its latest annual PTY attrition ~~adjustment~~filing, requesting annual revenue increases of $2 million in southern California, $542,000 in northern California, and $271,000 for ~~the two additional years).~~

~~Nevada Jurisdiction~~

~~General Revenues Adjustment.~~In June 2016, Southwest requested authorization from the Public Utilities Commission of Nevada (“PUCN”) to adjust rates associated with its revenue decoupling mechanism (General Revenues Adjustment, or “GRA”). TheSouth Lake Tahoe. This filing was approved in December ~~2016,~~2018 and rates were made effective in January 2019. At the same time, rates were updated to recover the regulatory asset associated with the revenue decoupling mechanism, or margin tracker.

Greenhouse Gas (“GHG”) Compliance. California Assembly Bill Number 32 and the regulations promulgated by the California Air Resources Board, require Southwest, as a covered entity, to comply with all applicable requirements associated with California GHG emissions reporting and the California Cap and Trade Program. The CPUC issued a decision in March 2018 adopting an allocation methodology to distribute the net revenues or costs for years 2015-2017 beginning in the second quarter of 2018. Southwest began amortizing its then existing net cost balance over a 12-month period with recovery rates effective ~~January 2017. The~~July 2018 for all applicable rate ~~adjustment~~schedules. In addition, for years 2019-2020, the decision directed the adoption of an allocation methodology to distribute the revenue proceeds through a California Climate Credit to active residential customers in April of each year, following initial required credits in October 2018. GHG compliance costs recovered through rates (including transportation customer rates) have no impact on earnings overall.



	43



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		March 31, 2019

Customer Data Modernization Initiative. As discussed above for Arizona, Southwest is embarking on an initiative to replace both its customer service system and its gas transaction system, referred to as its CDMI. On April 26, 2019, Southwest filed an application with the CPUC seeking authority to establish a two-way, interest bearing balancing account to record costs associated with the CDMI to mitigate adverse financial implications associated with this significant multi-year project. Total cost for the CDMI is an estimated $174 million, approximately $19 million of which would be allocable to the California rate jurisdiction. Resolution of this request is expected to refund approximately $16.7 million during 2017. In June 2017, Southwest filed to adjust the GRA surcharge effective January 2018, which was approved by the PUCN during the third quarter of 2017. This will result in a decrease in collections from customers of $15.4 million, based on the over-recovered balance in the account atbefore the end of ~~April 2017.~~2019.

Nevada Jurisdiction

Nevada General Rate Case. Southwest filed its most recent general rate case with the PUCN in May 2018 and updated the request following the certification period ending in July 2018. The filing requested a statewide overall revenue increase of approximately $29.7 million.

The PUCN issued a rate case decision in December 2018, which authorized a return on equity (“ROE”) of 9.25% relative to the Company’s proposed capital structure of 49.66% equity applicable to both southern and northern Nevada and provided for an overall revenue increase of $9.5 million in southern Nevada and a revenue decrease in northern Nevada of $2 million. New rates associated with the PUCN’s decision became effective in January 2019.

The rate relief was lower than the amounts requested due to several factors, including the 9.25% granted return on equity, as opposed to a requested 10.3%, and the exclusion from rates at this time of costs attributable to several software applications, albeit allowing the Company to request recovery in its next general rate case filing. In response to the PUCN’s decision, management filed a Petition for Reconsideration (the “Petition”) of several rate case issues in January 2019. The PUCN Staff also filed a Petition for Reconsideration requesting several technical clarifications on the rate case decision with respect to how to calculate the intended results of the decision. The PUCN, in turn, issued a decision regarding both petitions in February 2019 that modified certain parts of the original order, but granted no further rate relief. The modified final decision resulted in a revenue increase of $9.2 million in southern Nevada and a revenue decrease in northern Nevada of $2.1 million. The decision included a reduction in depreciation expense of $800,000 and overall, resulted in a net increase in revenues of $7.1 million and an increase in operating income of $7.9 million. The resulting modified rates became effective March 2019. Management decided to seek judicial review of the Commission’s rate order, the resolution of which is expected by the end of 2019.

General Revenues Adjustment. As part of the Annual Rate Adjustment (“ARA”) filing in 2018, the PUCN authorized rate adjustments associated with the General Revenues Adjustment (“GRA”), to recover $5.6 million from customers during 2019. The continuation of the GRA was affirmed as part of the December 2018 rate case decision. While there is no impact to net income overall from this rate adjustment, operating cash flows will ~~be reduced~~increase as the associated regulatory ~~liability~~asset balance is ~~refunded.~~

recovered.

Infrastructure Replacement ~~Mechanisms.~~Mechanism.In ~~January~~ 2014, the PUCN approved final rules for athe GIR mechanism ~~to defer~~which defers and ~~recover~~recovers certain costs associated with accelerated replacement of qualifying infrastructure that ~~does~~would not otherwise currently provide incremental revenues. Associated with ~~such~~the replacement of various types of pipe infrastructure under the mechanism (Early Vintage Plastic Pipe (“EVPP”), COYL, and VSP), each year Southwest files a ~~Gas Infrastructure Replacement (“GIR”)~~GIR “Advance Application” in May and a “Rate Application,” generally in October. In June 2018, Southwest filed its Advance Application requesting ~~authority~~authorization to replace qualifying infrastructure ~~and files separately as part~~with projects totaling $228 million to be completed over a three-year period, with a total annualized revenue requirement (following the three-year replacement period) of approximately $21.7 million. Historically, Southwest has requested approval of projects on an annual ~~GIR filing~~basis; however, it requested to move to a multi-year approval process for projects to improve operational flexibility and enhance coordination with contractors and governmental agencies. The PUCN issued a decision limiting its approval to the 2019 projects, resulting in an approval of $34.3 million for projects to be completed in 2019 (EVPP $9.3 million, COYL $1.3 million, and VSP $23.7 million).

The Rate Application is generally filed each October to reset the GIR recovery surcharge related to previously approved and completed ~~projects. For~~ projects, ~~approved in 2015 and completed in 2016,~~with new rates becoming effective each January. During the ~~annualized revenue was approximately $4.5 million. In September 2016, Southwest filed~~third quarter of 2018, management proposed to adjust the GIR surcharge ~~to recover~~rate as part of the ~~annual revenue requirement for amounts previously deferred. This~~rate case in lieu of filing a separate application, which was approved and implemented in ~~December 2016 and new rates became effective~~ January 2017. In June 2016, Southwest filed an Advance Application for projects expected to be completed during 2017, proposing approximately $60 million of accelerated pipe replacement to include early vintage plastic, early vintage steel, and a COYL program. The COYL program, while not large in magnitude, represents the first of its kind in Nevada, modeled after the program in place for several years in Southwest’s Arizona jurisdiction. The PUCN issued an Order on the Advance Application in October 2016, approving approximately $57.3 million of replacement work with an annualized revenue requirement estimated at approximately $5.3 million. With regard to the proposed COYL program, approval was granted for the northern Nevada rate jurisdiction, but consideration for the southern Nevada rate jurisdiction was deferred until 2020, at which time certain early vintage plastic pipe programs are expected to be completed. In September 2017, Southwest filed to adjust the GIR surcharge to recover the annual revenue requirement for amounts previously deferred. For projects approved in 2016 and completed by July of 2017


~~SOUTHWEST GAS HOLDINGS, INC.~~		~~Form 10-Q~~
~~SOUTHWEST GAS CORPORATION~~		~~September 30, 2017~~

~~, the deferred annualized revenue requirement is approximately $8.7 million. This filing~~2019. It is expected to ~~be approved~~result in ~~December 2017 with rates becoming effective January 2018.~~

In May 2017, Southwest filed a GIR Advance Application with the PUCN for projects totaling approximately $66 million that are expected to be completed during 2018. Similar to previous years, the proposed projects consistincremental annual margin of early vintage plastic and early vintage steel pipe, as well as the continuation of the previously approved COYL program in northern Nevada. Southwest entered into a settlement agreement with the intervening parties and filed a proposed stipulation requesting the Commission approve the settlement agreement. The settlement agreement proposed that the request be approved as filed and that Southwest be authorized to start replacing COYLs in southern Nevada in certain situations, and to recover costs through the GIR mechanism. The PUCN issued an Order on the GIR Advance Application in September 2017, approving approximately $65.7 million of replacement work (with an annualized revenue requirement estimated at approximately $6 ~~million) and the COYL provisions in southern Nevada.~~

Subsequent to three GIR rate applications, the GIR regulations require Southwest to either file a general rate case or a request for waiver before it can file another GIR advance application. The October 2016 approved rate application was the third such filing by Southwest subject to these regulations, necessitating a request for waiver to permit Southwest to proceed with the GIR program without filing a general rate case in 2017. This waiver was approved by the PUCN in January 2017; however, in order to continue the GIR program in 2018 (for projects recommended for completion under the program after 2018), a general rate case will need to be filed before June 2018.

million.

Conservation and Energy Efficiency (“CEE”). ~~In June 2015, Southwest requested recovery~~ The PUCN allows deferral (and later recovery) of approved conservation and energy efficiency ~~and conservation development and implementation~~ costs, ~~including promotions and incentives~~recovery rates for ~~various programs, as originally approved for deferral by~~which are adjusted in the ~~PUCN effective November 2009. While recovery of initial program costs was approved as~~annual rate adjustment filing. As part of the ~~most recent general rate case, amounts incurred subsequent to May 2012 (the certification period) continued to be deferred. Approved rates for thepost-May~~ 2012 costs deferred (including previously expected program expenditures for 2016) became effective January 2016 and resulted in annualized margin increases of $2 million in northern Nevada and $8.5 million in southern Nevada. Then, as part of the2018 ARA filing, ~~approved in December 2016,~~ Southwest requested and received modified rates, effective January ~~2017,~~2019, which are expected to result in an annualized margin ~~decreases~~decrease of ~~$1.4 million in northern Nevada and $1.3~~$4.1 million in southern Nevada ~~to return over-collected balances.~~and a $58,000 decrease in northern Nevada. There is, however, no anticipated impact to net income overall from these ~~decreases~~changes as amortization expense ~~will also be reduced.~~

is impacted by approximately the same amounts.

Expansion and Economic Development Legislation.In ~~February 2015,~~January 2016, final regulations were approved by the PUCN associated with legislation (“SB 151”) ~~was~~previously introduced and signed into law in ~~Nevada directing the PUCN to adopt regulations authorizing~~Nevada. The legislation authorized natural gas utilities to expand their infrastructure ~~consistent with a program of economic development. This includes providing gas~~to provide service to unserved and underserved areas in Nevada, as well as attracting and retaining utility customers and accommodating the expansion of existing business customers. SB 151 was signed into law in May 2015. The draft regulations were reviewed by the Legislative Council Bureau and final regulations were approved by the PUCN in January 2016.

Nevada.



	44



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		March 31, 2019

In November 2017, Southwest filed for ~~preapproval~~pre-approval of a project to extend service to ~~include the service territory of~~ Mesquite, Nevada, in accordance with the SB 151 regulations. ~~This project proposes~~Ultimately, the ~~extension of existing facilities~~PUCN issued an order approving Southwest’s proposal to expand natural gas infrastructure to Mesquite, ~~at an estimated cost~~including a capital investment of approximately ~~$30 million.~~$28 million and the construction of approximately 37 miles of distribution pipeline (including the approach main). The cost is ~~proposed~~expected to be recovered through a volumetric ~~surcharge on~~rates from all southern Nevada ~~customers. A second phase~~customers (including new customers in Mesquite). The annual revenue requirement associated with the project is ~~then proposed to convert existing homes to~~approximately $2.8 million. Southwest conducted preliminary design work and began serving certain customers with an approved virtual pipeline network in February 2019, which provides temporary natural gas ~~service, which will be charged as a separate surcharge~~supply using portions of the approved distribution system and compressed natural gas tanks. It is estimated that permitting and construction of the approach main to bring the permanent supply to Mesquite ~~customers only. A decision~~and construction of the remaining approved distribution system could take an additional two years to complete.

Customer Data Modernization Initiative. As indicated in the other jurisdictions, Southwest is planning to embark on an initiative to replacement both its customer service system and gas transaction system with the CDMI. In March 2019, Southwest filed a request seeking authority to establish a regulatory asset to defer the revenue requirement related to the CDMI to mitigate the financial attrition associated with this ~~proposal~~significant multi-year project. Of the total $174 million estimated cost of the CDMI, approximately $59 million would be allocable to the Nevada rate jurisdictions. Resolution of this request is expected ~~within~~before the ~~required210-day~~ ~~time period for filings~~end of ~~this type.~~

2019.

Federal Energy Regulatory Commission (“FERC”) Jurisdiction

General Rate Case. Paiute Pipeline Company (“Paiute”), a wholly owned subsidiary of Southwest, filed its most recent general rate case with the FERC in February 2014, and following settlement proceedings, tariff changes were filed in March 2015. The settlement implied an 11.5% pre-tax rate of return, and as part of the agreement, Paiute agreed to file a rate case no later than the end of May 2019. See Tax Reform below.

2018 Expansion. In response to growing demand in the Carson City and South Lake Tahoe areas of northern California and northern Nevada, Paiute ~~Pipeline Company (“Paiute”)~~ evaluated shipper interest in acquiring additional transportation capacity, and executed precedent agreements for incremental transportation capacity with ~~Southwest during~~Southwest. The FERC approved the ~~third quarter~~project at a cost of ~~2016. In October 2016, Paiute initiated apre-filing~~ ~~review process with~~$22 million, which approximates the ~~FERC for an expansion project, which was approved during~~total cost incurred to complete the ~~same month. In~~project. Construction work began in July ~~2017, a certificate application was filed, which included an applicant environmental assessment. The project is anticipated to consist~~2018, consisting of 8.5 miles of additional transmission pipeline ~~infrastructure at an approximate~~infrastructure. The project was completed and placed in service in November 2018.

Tax Reform. The FERC issued a Notice of Proposed Rulemaking (“NOPR”) on whether the federal income tax changes from U.S. tax reform cause pipeline rates to no longer be just and reasonable. The NOPR provided for pipelines to file a FERC Form No. 501‑G to evaluate the impact of tax reform on their revenue requirement. In addition to filing the form, pipelines would select one of the following four options: (1) make a limited “Section 4” filing to reduce rates by the percentage reduction in cost of ~~$18 million. If~~service shown in its FERC Form No. 501-G; (2) commit to file either a prepackaged uncontested rate settlement or a general Section 4 rate case; (3) file a statement explaining why no change in rates was necessary; or (4) file the ~~process progresses as planned,~~new FERC form without taking any other action. In July 2018, the FERC issued a ~~decision should~~final rule (Order No. 849), effective in September 2018, adopting procedures for determining which jurisdictional pipelines may be ~~received by April~~collecting unjust and unreasonable rates in light of tax reform. Paiute filed its Form No. 501-G in the fourth quarter of 2018. Two of Paiute’s shippers requested that FERC evaluate Paiute’s rates and/or take action to ensure that Paiute’s customers are afforded the relief contemplated in Order No. 849. The FERC has not acted on these requests; however, in the absence of any action in advance, Paiute’s general rate case application, expected to be filed in late May 2019, will further address tax reform. In November 2018, Southwest Gas Transmission Company (“SGTC”), also a FERC-regulated subsidiary of Southwest, filed an uncontested, prepackaged settlement in lieu of filing the FERC Form No. 501-G, with no material impacts overall. FERC issued an Order approving the settlement in December 2018, and ~~the additional facilities could be~~new rates became effective in ~~place by the end of 2018.~~

January 2019.



	45



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		~~September 30, 2017~~March 31, 2019

PGA Filings

The rate schedules in all of Southwest’s service territories contain provisions that permit ~~adjustments~~adjustment to rates as the cost of purchased gas changes. These deferred energy provisions and purchased gas adjustment clauses are collectively referred to as “PGA” clauses. Differences between gas costs recovered from customers and amounts paid for gas by Southwest result in over- or under-collections. At ~~September 30, 2017,~~March 31, 2019, under-collections in ~~Arizona~~northern and ~~Northern~~southern Nevada and California resulted in an asset of ~~approximately $6.2~~$65.2 million and over-collections in ~~Southern Nevada and California~~Arizona resulted in a liability of ~~$15~~$72.2 million on the Company’s and Southwest’s ~~condensed consolidated~~Condensed Consolidated Balance Sheets. During the third quarter of 2018, a $49 million refund was received by Southwest from El Paso Natural Gas, L.L.C. (“EPNG”) as part of a rate case settlement, the majority of which relates to Southwest’s transmission service into Arizona and resulted in a liability included in Deferred purchased gas costs. This amount is included in the over-collected balance ~~sheets. Gas cost rates paid~~noted above. In October 2018, Southwest filed an application with the ACC requesting an alternate methodology for refunding the EPNG funds allocated to ~~suppliers~~the Arizona rate jurisdiction customers, which would have ~~been higher than~~involved offsetting sizable amounts ~~recovered~~receivable from Arizona customers ~~during~~under the ~~first nine months~~DCA mechanism. This proposal was offered as an alternative to refunding the amounts through the PGA in order to provide administrative efficiency. Ultimately, the ACC considered the EPNG issue separately and approved, effective May 1, 2019, the return of ~~2017, resulting~~the EPNG rate case settlement dollars as a special per-therm PGA credit, which is expected to be in ~~fluctuations since December 31, 2016. Tariff rates have been adjusted in all jurisdictions during this period.~~ place for approximately twelve months.

Filings to change rates in accordance with PGA clauses are subject to audit by state regulatory commission staffs. PGA changes impact cash flows but have no direct impact on profit margin. However, gas cost deferrals and recoveries can impact comparisons between periods of individual consolidated income statement components. These include Gas operating revenues, Net cost of gas sold, Net interest deductions, and Other income (deductions).

The following table presents Southwest’s outstanding PGA balances receivable/(payable) (thousands of dollars):

   September 30, 2017    December 31, 2016    September 30, 2016
Arizona
   $ 1,324    $ (20,349 )    $ (34,425 )
Northern Nevada
   4,906    (3,339 )    (10,326 )
Southern Nevada
   (13,711 )    (66,788 )    (77,402 )
California
   (1,260 )    2,608    (1,246 )






   $ (8,741 )    $ (87,868 )    $ (123,399 )



	March 31, 2019			December 31, 2018			March 31, 2018
Arizona	$	(72,213	)	$	(72,878	)	$	11,687
Northern Nevada	12,962			4,928			2,993
Southern Nevada	51,221			(5,951		)	4,059
California	1,059			(933		)	(371		)
	$	(6,971	)	$	(74,834	)	$	18,368

Capital Resources and Liquidity

Cash on hand and cash flows from operations in the past twelve months have generally provided the majority of cash used in investing activities (primarily for construction expenditures and property additions). In recent years, ~~certain~~the Company has accelerated pipe replacement ~~has been accelerated to take advantage of bonus depreciation tax incentives and~~activities to fortify system integrity and reliability, notably in association with ~~new~~ gas infrastructure replacement programs as discussed ~~above. During this same time, benefits were derived~~previously. This accelerated activity has necessitated the issuance of both debt and equity securities to supplement cash flows from ~~debt refinancing and strategic debt redemptions.~~operations. The ~~Company’s capitalization strategy is~~Company endeavors to maintain an appropriate balance of equity and debt to maintain strong investment-grade credit ratings, which should minimize interest costs.

Cash Flows

Southwest Gas Holdings, Inc.:

Operating Cash Flows.Cash flows provided by consolidated operating activities ~~decreased $179~~increased $8 million in the first ~~nine~~three months of ~~2017~~2019 as compared to the same period of ~~2016.~~2018. The ~~decline~~improvements in cash flows included an increase in net income and benefits from depreciation as well as the impacts of working capital components overall. Additionally, changes in operating cash flows ~~was primarily attributable to~~are typically influenced significantly by the change in ~~deferred~~ purchased gas costs, ~~noted above. Refer~~including amounts incurred and deferred, as well as when amounts are incorporated in customer bills to~~Results of Natural Gas Operations~~ ~~and~~~~Rates and Regulatory Proceedings~~.

recover the deferred balances.

Investing Cash Flows.Cash used in consolidated investing activities increased ~~$35~~$53 million in the first ~~nine~~three months of ~~2017~~2019 as compared to the same period of ~~2016.~~2018. The change was primarily due to increased construction expenditures in the natural gas operations segment, including scheduled and accelerated replacement activity. ~~The prior period included an outflow of $17 million to facilitate a construction services acquisition.~~

Financing Cash Flows.Net cash provided by consolidated financing activities increased ~~$195~~$36 million in the first ~~nine~~three months of ~~2017~~2019 as compared to the same period of ~~2016.~~2018. The increase was primarily due to ~~activity~~increased borrowings under Southwest’s credit facility (see Note 8 – Short-Term Debt), as well as an increase in issuances of stock under the ~~credit facility and commercial paper program (an increase in borrowings in~~Company’s Equity Shelf Program during the ~~current-year nine-month period and the repayment~~first three months of ~~borrowings in the prior-year nine-month period)~~2019 (see Note 6 – Common Stock).

The ~~prior period included proceeds in utility operations from the issuance of $300~~Company issued approximately $22.8 million in ~~senior notes. The Company also issued approximately $12 million~~stock during ~~2017 in stock~~the first three months of 2019 under its Equity Shelf ~~Program. See also~~~~Note 5 – Common Stock~~,Program and ~~the discussion below. The first nine months of 2017 includes the August 2017 $23 million purchase of the previous owners’ interest in Centuri. See also~~~~Note 9 – Construction Services Redeemable Noncontrolling Interest~~ ~~for additional information.~~


~~SOUTHWEST GAS HOLDINGS, INC.~~		~~Form 10-Q~~
~~SOUTHWEST GAS CORPORATION~~		~~September 30, 2017~~

Dividends paid increased in the first nine months of 2017 as compared to the same period of 2016 as a result of an increase in the quarterly dividend rate and an increase in the number of shares outstanding.

~~The Company issued~~ approximately ~~103,000~~53,000 additional shares of common stock collectively through the Restricted Stock/Unit Plan and the



	46



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		March 31, 2019

Management Incentive Plan.

~~Southwest Gas Corporation:~~

~~Operating Cash Flows.~~~~Cash flows provided by operating activities decreased $172 million in~~ Also during the ~~first nine~~three months ended March 31, 2019, the Company issued 34,000 shares of ~~2017 as compared to~~common stock through the ~~same period of 2016. The decline in operating cash flows was primarily attributable to the change in deferred purchased gas costs as discussed above. Refer to~~~~Results of Natural Gas Operations~~Dividend Reinvestment and~~Rates and Regulatory Proceedings~~.

~~Investing Cash Flows.~~Cash used in investing activities increased $68 million in the first nine months of 2017 as compared to the same period of 2016. The change was primarily due to additional construction expenditures, as indicated above.

~~Financing Cash Flows.~~Net cash provided by financing activities increased $211 million in the first nine months of 2017 as compared to the same period of 2016. The increase was primarily due to activity under the credit facility and commercial paper program (an increase in borrowings in the current-year nine-month period and the repayment of borrowings in the prior-year nine-month period). The prior period included proceeds from the issuance of $300 million in senior notes as discussed above. The current period included capital contributions from Southwest Gas Holdings, Inc.

Stock Purchase Plan (“DRSPP”), raising approximately $2.8 million.

The capital requirements and resources of the Company generally are determined independently for the natural gas operations and ~~construction~~utility infrastructure services segments. Each business activity is generally responsible for securing its own external debt financing sources.

However, the holding company may raise funds through stock issuance or other external financing sources in support of each business segment, as discussed in Note 6 – Common Stock.

Southwest Gas Corporation:

Operating Cash Flows. Cash flows provided by operating activities increased $5 million in the first three months of 2019 as compared to the same period of 2018. The increase in operating cash flows was primarily attributable to an increase in net income and benefits from depreciation as well as the impacts of working capital components overall. Offsetting those increases were the impacts related to deferred purchased gas costs noted above.

Investing Cash Flows. Cash used in investing activities increased $32 million in the first three months of 2019 as compared to the same period of 2018. The change was primarily due to additional construction expenditures, as indicated above.

Financing Cash Flows. Net cash provided by financing activities increased $62 million in the first three months of 2019 as compared to the same period of 2018. The increase was primarily due to borrowing under the short-term portion of the credit facility in 2019 and capital contributions from Southwest Gas Holdings, Inc. The prior period included repayment of the credit facility and commercial paper program borrowings following the issuance of $300 million in senior notes in March 2018.

Gas Segment Construction Expenditures and Financing

During the twelve-month period ended ~~September 30, 2017,~~March 31, 2019, construction expenditures for the natural gas operations segment were ~~$515~~$715 million. The majority of these expenditures represented costs associated with scheduled and accelerated replacement of existing transmission, distribution, and general plant. Cash flows from operating activities of Southwest were ~~$337~~$388 million during this time and provided approximately ~~57%~~48% of construction expenditures and dividend requirements.

~~Southwest~~

Management estimates natural gas segment construction expenditures during the three-year period ending December 31, ~~2019~~2021 will be ~~between $1.6 billion and $1.8~~approximately $2.1 billion. Of this amount, approximately ~~$570~~$710 million is expected to be incurred in ~~2017.~~2019. Southwest plans to continue ~~as appropriate,~~ to request regulatory support to accelerate projects that improve system flexibility and reliability (including replacement of early vintage plastic and steel pipe). This includes the recent approval to complete accelerated replacement projects in Nevada of $57.3 million and $65.7 million in 2017 and 2018, respectively. It also incorporates programs included in the recently approved Arizona general rate case settlement (the continuation of the COYL program and implementation of a vintage steel pipe replacement program). Southwest may expand existing, or initiate new, programs. ~~If efforts continue to be successful, significant~~Significant replacement activities are expected to continue well beyond the next few years. See alsoRates and Regulatory Proceedings for discussion of Nevada infrastructure, Arizona COYL, and an LNG facility. During the three-year period, cash flows from operating activities of Southwest are expected to provide approximately ~~60%~~45% to ~~70%~~50% of the funding for gas operations total construction expenditures and dividend requirements. Any additional cash requirements are expected to be provided by existing credit facilities, equity contributions from the Company, and/or other external financing sources. The timing, types, and amounts of any additional external financings will be dependent on a number of factors, including the cost of gas purchases, conditions in the capital markets, timing and amounts of rate relief, timing differences between U.S. federal taxes embedded in customer rates and amounts implemented under tax reform, as well as growth levels in Southwest’s service areas and earnings. External financings could include the issuance of debt securities, bank and other short-term borrowings, and other forms of financing.

In March 2018, Southwest issued $300 million in 3.7% Senior Notes at a discount of 0.185%. The notes will mature in April 2028. The proceeds were used to repay amounts then outstanding under the revolving portion of its credit facility and under the commercial paper program.

In March 2017, the Company filed with the ~~Securities Exchange Commission (“SEC”)~~SEC an automatic shelf registration statement for the offer and sale of up to $150 million of common stock from time to time inat-the-market offerings under the prospectus included therein and in accordance with the Sales Agency Agreement, dated March 29, 2017, between the Company and BNY Mellon Capital Markets, LLC (the “Equity Shelf Program”). ~~Sales~~The Company has issued the full capacity of the equity program, concluding during the quarter ended March 31, 2019.

During the twelve months ended March 31, 2019, 1,286,234 shares ~~will~~

were issued in at-the-market offerings at an average price of $76.99 per share with gross proceeds of $99 million, agent commissions of $990,234, and net proceeds of $98 million. See Note 6 – Common Stock for more information.

Bonus Depreciation

In 2017, with the enactment of U.S. tax reform, the bonus depreciation deduction percentage changed from 50% to 100% for “qualified property” placed in service after September 27, 2017 and before 2023. The bonus depreciation tax deduction phases out starting in 2023, by 20% for each of the five following years. Qualified property excludes most public utility property. The



	47



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		~~September 30, 2017~~March 31, 2019

continue to be made at market prices prevailing at the time of sale. Net proceeds from the sale of shares of common stock under the Equity Shelf Program are intended for general corporate purposes, including the acquisition of property for the construction, completion, extension or improvement of pipeline systems and facilities located in and around the communities Southwest serves.

~~During the nine months ended September 30, 2017, 147,077 shares were issued inat-the-market~~ ~~offerings at an average price of $80.07 per share with gross proceeds of $11.8 million, agent commissions of $118,000, and net proceeds of $11.7 million. See~~~~Note 5 – Common Stock~~ ~~for more information.~~

~~Bonus Depreciation~~

~~In December 2015, the Protecting Americans from Tax Hikes Act of 2015 (“PATH Act”) was enacted extending the 50%~~

Company estimates bonus depreciation ~~tax deduction for qualified property acquired or constructed and placedin-service~~ during 2015 (and additional years as noted below) as well as other tax deductions, credits, and incentives. The bonus depreciation tax deduction will be phased out over five years. The PATH Act provides for a 50% bonus depreciation tax deduction in 2015 through 2017, 40% in 2018, 30% in 2019, and no deduction after 2019. Based on forecasted qualifying construction expenditures, Southwest estimates the bonus depreciation provision of the PATH Act will defer the payment of approximately ~~$29~~$30 million ($4 million of which relates to utility operations) of federal income taxes for ~~2017, resulting in a minimal amount of federal income tax being paid.~~

2019.

Dividend Policy

Dividends are payable on the Company’s common stock at the discretion of the Board of Directors ~~(“Board”~~(the “Board”). In setting the dividend rate, the Board currently targets a payout ratio of 55% to 65% of consolidated earnings per share and considers, among other factors, current and expected future earnings levels, our ongoing capital expenditure plans and expected external funding needs, ~~our payout ratio, and~~in addition to our ability to maintain strong credit ratings and liquidity. The Company has paid dividends on its common stock since 1956 and has increased that dividend each year since 2007. In February ~~2017,~~2019, the Board elected to increase the quarterly dividend from ~~$0.45~~$0.52 to ~~$0.495~~$0.545 per share, representing a ~~10%~~4.8% increase, effective with the June ~~2017~~2019 payment. ~~The Board currently targets a payout ratio of 55% to 65% of consolidated earnings per share.~~

Liquidity

Liquidity refers to the ability of an enterprise to generate sufficient amounts of cash through its operating activities and external financing to meet its cash requirements. Several general factors (some of which are out of the control of the Company) that could significantly affect liquidity in future years include: variability of natural gas prices, changes in the ratemaking policies of regulatory commissions, regulatory lag, customer growth in the natural gas segment’s service territories, the ability to access and obtain capital from external sources, interest rates, changes in income tax laws, pension funding requirements, inflation, and the level of earnings. Natural gas prices and related gas cost recovery rates, as well as plant investment, have historically had the most significant impact on liquidity.

On an interim basis, Southwest defers over- or under-collections of gas costs to PGA balancing accounts. In addition, Southwest uses this mechanism to either refund amounts over-collected or recoup amounts under-collected as compared to the price paid for natural gas during the period since the last PGA rate change went into effect. At ~~September 30, 2017,~~March 31, 2019, the combined balance in the PGA accounts totaled an over-collection of ~~$8.7~~$7 million, which included the EPNG rate case settlement of $49 million. SeePGA Filingsfor more information.

~~In March 2017, Southwest Gas Holdings, Inc. entered into~~

The Company has a credit facility with a borrowing capacity of $100 million that expires in March 2022. The Company intends to utilize this facility for short-term financing needs. At ~~September 30, 2017, $27.5 million was~~March 31, 2019, no borrowings were outstanding onunder this facility.

~~In March 2017,~~

Southwest ~~Gas Corporation amended its~~has a credit facility, ~~increasing the~~with borrowing capacity ~~from $300 million to~~of $400 million, ~~and extended the term of the facility from March 2021 to~~which expires in March 2022. Southwest ~~continues to designate~~designates $150 million of the facility for long-term borrowing needs and the remaining $250 million for working capital purposes. The maximum amount outstanding on the long-term portion of the credit facility (including a commercial paper program, as noted below) during the first ~~nine~~three months of ~~2017~~2019 was $150 ~~million. At September 30, 2017, $150~~ million, the same amount which was outstanding ~~on the long-term and $83~~at March 31, 2019. Commercial paper borrowings are discussed below. Additionally, $188 million was outstanding on the short-term portion of this credit facility. The credit facility can be used as necessary to meet liquidity requirements, including temporarily financing under-collected PGA balances, if any, or meeting the refund needs of over-collected balances. This credit facility has been


~~SOUTHWEST GAS HOLDINGS, INC.~~		~~Form 10-Q~~
~~SOUTHWEST GAS CORPORATION~~		~~September 30, 2017~~

adequate for Southwest’s working capital needs outside of funds raised through operations and other types of external ~~financing.~~

financing, and as indicated, any additional cash requirements would include the existing credit facility, equity contributions from the Company, and/or other external financing sources.

Southwest has a $50 million commercial paper program. Any issuance under the commercial paper program is supported by Southwest’s current revolving credit facility and, therefore, does not represent additional borrowing capacity. Any borrowing under the commercial paper program during 2019 will be designated as long-term debt. Interest rates for the commercial paper program are calculated at the current commercial paper rate during the borrowing term. At ~~September 30, 2017, no borrowings were~~March 31, 2019, there was $50 million outstanding under this program.

Centuri has a ~~$300 million~~senior secured revolving credit and term loan facility ~~that~~with borrowing capacity of $590 million (refer to Note 7 – Long-Term Debt). The line of credit portion of the facility is scheduled to expire in October 2019. The term loan facility portion had an initial limit of approximately $150 million, which was reached in 2014 and; $107 million was outstanding (after repayments) at September 30, 2017. The secured revolving credit facility portion also has a limit of $150$325 million; amounts borrowed and repaid under ~~this portion of~~ the revolving credit facility are available to bere-borrowed. The term loan facility portion has a limit of approximately $265 million. The $590 million credit and term loan facility expires in November 2023. The $590 million revolving credit and term loan facility is secured by substantially all of Centuri’s assets except those explicitly excluded under the terms of the agreement (including owned real estate and certain certificated vehicles). Centuri assets securing the facility at March 31, 2019 totaled $1.1 billion. The maximum amount outstanding on the revolving credit facility during the first ~~nine~~three months of ~~2017~~2019 was ~~$104~~$25 million. At ~~September 30, 2017, $81.3~~March 31, 2019, $6 million was outstanding on the secured revolving credit facility. Also at ~~September 30, 2017,~~March 31, 2019, there was approximately ~~$52~~$300 million, net of letters of credit, available under the line of credit.

~~The following table sets forth the ratios of earnings to fixed charges for the Company. Due to the seasonal nature of the Company’s business, these ratios are computed on a twelve-month basis:~~

   For the Twelve Months Ended
   September 30,
2017    December 31,
2016
Ratio of earnings to fixed charges
   3.50    3.46

~~Earnings are defined as the sum of pretax income plus fixed charges. Fixed charges consist of all interest expense including capitalized interest,one-third~~ ~~of rent expense (that approximates the interest component of such expense), and net amortized debt costs.~~



	48



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		March 31, 2019

Forward-Looking Statements

This quarterly report contains statements which constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (“Reform Act”). All statements other than statements of historical fact included or incorporated by reference in this quarterly report are forward-looking statements, including, without limitation, statements regarding the Company’s plans, objectives, goals, intentions, projections, strategies, future events or performance, negotiations, and underlying assumptions. The words “may,” “if,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “continue,” “forecast,” “intend,” “endeavor,” “promote,” “seek,” and similar words and expressions are generally used and intended to identify forward-looking statements. For example, statements regarding operating margin patterns, customer growth, the composition of our customer base, price volatility, seasonal patterns, payment of debt, interest savings, the Company’s COLI strategy, replacement market and new construction market, expected impacts of valuation adjustments associated with the redeemable noncontrolling interest in Linetec, the impacts of the U.S. tax reform including disposition in regulatory proceedings and bonus depreciation tax deductions, ~~amount~~the impact of recent PHMSA rulemaking, the amounts and timing for completion of estimated future construction expenditures, including the LNG facility in southern Arizona, ~~the cost of the 2018 Paiute expansion project in northern Nevada and northern California,~~ forecasted operating cash flows and results of operations, net earnings impacts from gas infrastructure replacement surcharges, funding sources of cash requirements, amounts generally expected to be reflected in ~~2017~~2019 or future period revenues from regulatory rate proceedings including amounts ~~resulting~~requested from the ~~settled~~recently filed Arizona general rate case, the approved recovery of the Arizona DCA balance, the outcome of judicial review of the recently concluded Nevada rate case, the anticipated timing of the Company’s reincorporation in Delaware, rates and surcharges, PGA, and other rate adjustments, sufficiency of working capital and current credit facilities, bank lending practices, the Company’s views regarding its liquidity position, ability to raise funds and receive external financing capacity and the intent and ability to issue ~~common~~various financing instruments and stock under the ~~Equity Shelf Program,~~December 2017 shelf registration statement or otherwise, future dividend increases and the Board’s current target dividend payout ratio, pension and ~~post-retirement~~postretirement benefits, certain ~~benefits~~impacts of tax acts, the effect of any rate changes or regulatory proceedings, contract or construction change order negotiations, impacts of accounting standard updates, infrastructure replacement mechanisms and ~~the~~ COYL ~~program,~~programs, statements regarding future gas prices, gas purchase contracts and derivative financial instruments, recoverability of regulatory assets, the impact of certain legal proceedings, and the timing and results of future rate hearings, including the multi-jurisdictional filings for recovery of the CDMI, and approvals are forward-looking


~~SOUTHWEST GAS HOLDINGS, INC.~~		~~Form 10-Q~~
~~SOUTHWEST GAS CORPORATION~~		~~September 30, 2017~~

statements. All forward-looking statements are intended to be subject to the safe harbor protection provided by the Reform Act.

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, customer growth rates, conditions in the housing market, the ability to recover costs through the PGA mechanisms or other regulatory assets, the effects of regulation/deregulation, governmental or regulatory policy regarding natural gas or alternative energy, the timing and amount of rate relief, the timing and methods determined by regulators to refund amounts to customers resulting from U.S. tax reform, changes in rate design, variability in volume of gas or transportation service sold to customers, changes in gas procurement practices, changes in capital requirements and funding, the impact of conditions in the capital markets on financing costs, changes in construction expenditures and financing, changes in operations and maintenance expenses, effects of pension expense forecasts, accounting changes and regulatory treatment related thereto, currently unresolved and future liability claims, changes in pipeline capacity for the transportation of gas and related costs, results of Centuri bid work, Centuri’s projections about the acquired business’ earnings (including accretion within the first twelve months) and future acquisition-related costs, impacts of changes in value of the redeemable noncontrolling interest if at other than fair value, resolution of events subject to cash consideration held back associated with representations, warranties, and other estimates including working capital adjustments related to the Linetec acquisition and impacts from final purchase accounting related thereto, Centuri ~~construction~~utility infrastructure expenses, differences between actual and originally expected outcomes of Centuri bid or other fixed-price construction agreements, outcomes from contract and change order negotiations, ~~and~~ ability to successfully procure new work, impacts from work awarded or failing to be awarded from significant customers, the mix of work awarded, the amount of work awarded to Centuri following the lifting of ~~the recent~~ work ~~stoppage,~~stoppages, acquisitions, and management’s plans related thereto, competition, our ability to raise capital in external financings, our ability to continue to remain within the ratios and other limits subject to our debt covenants, and ongoing evaluations in regard to goodwill and other intangible assets. In addition, the Company can provide no assurance that its discussions regarding certain trends relating to its financing and operating expenses will continue or cease to continue in future periods. For additional information on the risks associated with the Company’s business, seeItem 1A. Risk Factors andItem 7A. Quantitative and Qualitative Disclosures About Market Risk in the Annual Report onForm ~~10-K~~10‑K for the year ended December 31, ~~2016.~~

2018.

All forward-looking statements in this quarterly report are made as of the date hereof, based on information available to the Company as of the date hereof, and the Company assumes no obligation to update or revise any of its forward-looking statements even if experience or future changes show that the indicated results or events will not be realized.We caution you not to unduly rely on any forward-looking statement(s).



	49



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		March 31, 2019

~~ITEM 3.~~

~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

SeeItem 7A. Quantitative and Qualitative Disclosures about Market Risk in the ~~2016~~2018 Annual Report on Form10-K filed with the SEC. No material changes have occurred related to the disclosures about market risk.

~~ITEM 4.~~

~~CONTROLS AND PROCEDURES~~

ITEM 4. CONTROLS AND PROCEDURES

Management of Southwest Gas Holdings, Inc. and Southwest Gas Corporation has established disclosure controls and procedures (as defined in Rules13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to provide reasonable assurance that information required to be disclosed in their respective reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to management of each company, including each respective Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and benefits of controls must be considered relative to their costs. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or management override of the control. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.

Based on the most recent evaluation, as of ~~September 30, 2017,~~March 31, 2019, management of Southwest Gas Holdings, Inc., including the Chief Executive Officer and Chief Financial Officer, ~~believe~~believes the Company’s disclosure controls and procedures are effective at attaining the level of reasonable assurance noted above.


~~SOUTHWEST GAS HOLDINGS, INC.~~		~~Form 10-Q~~
~~SOUTHWEST GAS CORPORATION~~		~~September 30, 2017~~

There have been no changes in the Company’s internal ~~controls~~control over financial reporting (as defined in Rules13a-15(f) and15d-15(f) of the Exchange Act) during the ~~third~~first quarter of ~~2017~~2019 that have materially affected, or are likely to materially affect, the Company’s internal ~~controls~~control over financial reporting.

Based on the most recent evaluation, as of ~~September 30, 2017,~~March 31, 2019, management of Southwest Gas Corporation, including the Chief Executive Officer and Chief Financial Officer, ~~believe~~believes Southwest’s disclosure controls and procedures are effective at attaining the level of reasonable assurance noted above.

There have been no changes in Southwest’s internal ~~controls~~control over financial reporting (as defined in Rules13a-15(f) and15d-15(f) of the Exchange Act) during the ~~third~~first quarter of ~~2017~~2019 that have materially affected, or are likely to materially affect Southwest’s internal ~~controls~~control over financial reporting.

PART ~~II—~~II - OTHER INFORMATION

~~ITEM 1.~~

~~LEGAL PROCEEDINGS~~

ITEM 1. LEGAL PROCEEDINGS

The Company is named as a defendant in various legal proceedings. The ultimate dispositions of these proceedings are not presently determinable; however, it is the opinion of management that none of this litigation individually or in the aggregate will have a material adverse impact on the Company’s financial position or results of operations.

ITEMS 1A through 3. None.

ITEM 4. MINE SAFETY DISCLOSURES Not applicable.

ITEM 5. OTHER INFORMATION None.

~~ITEMS 1A through 3.~~ ~~None.~~

	50

~~ITEM 4.~~
	~~MINE SAFETY DISCLOSURES~~~~Not applicable.~~
SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		March 31, 2019

~~ITEM 5.~~

~~OTHER INFORMATION~~~~None.~~

~~ITEM 6.~~

~~EXHIBITS~~

ITEM 6. EXHIBITS

The following documents are filed, or furnished, as applicable, as part of this report onForm 10-Q:



Exhibit ~~3(i)~~10.01		— Amendment to the Centuri Group, Inc. Executive Long-Term Incentive Plan.
		~~Amendment to Articles of Incorporation of Southwest Gas Holdings, Inc.~~
Exhibit ~~3(ii)~~10.02		— Amendment to the Centuri Group, Inc. Long-Term Capital Investment Plan.
		~~Amended and Restated Bylaws of Southwest Gas Holdings, Inc.~~
Exhibit 10.01*10.03		— Form of Paul Daily Award Agreement under the Centuri Group, Inc. Executive Long-Term Incentive Plan.
		~~Centuri 2017 Short-Term Incentive Plan.~~
~~Exhibit 12.01~~		—		~~Computation of Ratios of Earnings to Fixed Charges – Southwest Gas Holdings, Inc.~~
Exhibit 31.01	-	—		Section 302 Certifications–Southwest Gas Holdings, Inc.

Exhibit 31.02	-	—		Section 302 Certifications–Southwest Gas ~~Corporation.~~Corporation

Exhibit 32.01	-	—		Section 906 Certifications–Southwest Gas Holdings, Inc.

Exhibit 32.02	-	—		Section 906 Certifications–Southwest Gas ~~Corporation.~~Corporation

Exhibit 101.INS		—	-	XBRL Instance Document

Exhibit 101SCH		—	-	XBRL Schema Document

Exhibit 101.CAL		—	-	XBRL Calculation Linkbase Document

Exhibit 101.DEF		—	-	XBRL Definition Linkbase Document

Exhibit 101.LAB		—	-	XBRL Label Linkbase Document
~~Exhibit101.PRE~~		—
Exhibit 101.PRE	-	XBRL Presentation Linkbase Document

~~Management Incentive Plan~~


	51



SOUTHWEST GAS HOLDINGS, INC.		Form 10-Q
SOUTHWEST GAS CORPORATION		~~September 30, 2017~~March 31, 2019

SIGNATURES

Pursuant to the requirements 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 Holdings, Inc.

(Registrant)

Date: ~~November 7, 2017~~

May 8, 2019

~~/s/ GREGORY J. PETERSON~~

~~Gregory J. Peterson~~

/s/ LORI L. COLVIN

Lori L. Colvin

Vice President/Controller and Chief Accounting Officer

Pursuant to the requirements 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

(Registrant)

Date: ~~November 7, 2017~~

May 8, 2019

~~/s/ GREGORY J. PETERSON~~

~~Gregory J. Peterson~~

/s/ LORI L. COLVIN

Lori L. Colvin

Vice President/Controller and Chief Accounting Officer



	52


	SEPTEMBER 30, 2017			DECEMBER 31, 2016
ASSETS
Utility plant:
Gas plant	$	6,440,547		$	6,193,564
Less: accumulated depreciation		(2,218,796	)		(2,172,966	)
Acquisition adjustments, net		81			196
Construction work in progress		164,030			111,177

Net utility plant		4,385,862			4,131,971

Other property and investments		369,303			342,343

Current assets:
Cash and cash equivalents		59,152			28,066
Accounts receivable, net of allowances		301,792			285,145
Accrued utility revenue		34,100			76,200
Income taxes receivable, net		5,462			4,455
Deferred purchased gas costs		6,230			2,608
Prepaids and other current assets		132,182			136,833

Total current assets		538,918			533,307

Noncurrent assets:
Goodwill		147,865			139,983
Deferred income taxes		1,467			1,288
Deferred charges and other assets		411,655			432,234

Total noncurrent assets		560,987			573,505

Total assets	$	5,855,070		$	5,581,126

CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock, $1 par (authorized—60,000,000 shares; issued and outstanding—47,731,840 and 47,482,068 shares)	$	49,362		$	49,112
Additionalpaid-in capital		924,213			903,123
Accumulated other comprehensive income (loss), net		(42,818	)		(48,008	)
Retained earnings		784,934			759,263

Total Southwest Gas Holdings, Inc. equity		1,715,691			1,663,490
Noncontrolling interest		(2,295	)		(2,217	)

Total equity		1,713,396			1,661,273
Redeemable noncontrolling interest		—			22,590
Long-term debt, less current maturities		1,731,981			1,549,983

Total capitalization		3,445,377			3,233,846

Current liabilities:
Current maturities of long-term debt		28,453			50,101
Short-term debt		110,500			—
Accounts payable		159,382			184,669
Customer deposits		70,162			72,296
Income taxes payable		1,543			1,909
Accrued general taxes		48,998			42,921
Accrued interest		24,543			17,939
Deferred purchased gas costs		14,971			90,476
Other current liabilities		197,854			168,064

Total current liabilities		656,406			628,375

Deferred income taxes and other credits:
Deferred income taxes and investment tax credits		894,011			840,653
Accumulated removal costs		312,000			308,000
Other deferred credits and other long-term liabilities		547,276			570,252

Total deferred income taxes and other credits		1,753,287			1,718,905


Total capitalization and liabilities	$	5,855,070		$	5,581,126


	THREE MONTHS ENDED						NINE MONTHS ENDED						TWELVE MONTHS ENDED
	SEPTEMBER 30,						SEPTEMBER 30,						SEPTEMBER 30,
	2017			2016			2017			2016			2017			2016
Operating revenues:
Gas operating revenues	$	213,059		$	200,179		$	935,823		$	980,927		$	1,276,308		$	1,376,388
Construction revenues		380,094			339,790			872,536			838,038			1,173,576			1,127,982

Total operating revenues		593,153			539,969			1,808,359			1,818,965			2,449,884			2,504,370

Operating expenses:
Net cost of gas sold		45,539			39,056			261,839			324,072			334,888			460,836
Operations and maintenance		102,278			102,438			314,488			301,979			414,233			400,222
Depreciation and amortization		58,529			69,845			189,089			217,764			260,457			286,977
Taxes other than income taxes		14,046			12,480			43,325			39,480			56,221			51,810
Construction expenses		342,629			300,611			806,586			757,919			1,073,090			1,009,188

Total operating expenses		563,021			524,430			1,615,327			1,641,214			2,138,889			2,209,033

Operating income		30,132			15,539			193,032			177,751			310,995			295,337

Other income and (expenses):
Net interest deductions		(19,494	)		(18,158	)		(56,863	)		(54,100	)		(76,423	)		(71,884	)
Other income (deductions)		2,876			2,565			8,788			6,756			11,501			10,861

Total other income and (expenses)		(16,618	)		(15,593	)		(48,075	)		(47,344	)		(64,922	)		(61,023	)

Income (loss) before income taxes		13,514			(54	)		144,957			130,407			246,073			234,314
Income tax expense (benefit)		3,094			(2,961	)		47,411			43,046			82,833			80,255

Net income		10,420			2,907			97,546			87,361			163,240			154,059
Net income attributable to noncontrolling interests		216			435			170			500			684			1,079

Net income attributable to Southwest Gas Holdings, Inc.	$	10,204		$	2,472		$	97,376		$	86,861		$	162,556		$	152,980

Basic earnings per share	$	0.21		$	0.05		$	2.05		$	1.83		$	3.42		$	3.22

Diluted earnings per share	$	0.21		$	0.05		$	2.03		$	1.82		$	3.39		$	3.20

Dividends declared per share	$	0.495		$	0.450		$	1.485		$	1.350		$	1.935		$	1.755

Average number of common shares outstanding		47,628			47,481			47,577			47,464			47,553			47,442
Average shares outstanding (assuming dilution)		47,986			47,830			47,912			47,802			47,896			47,787


	NINE MONTHS ENDED						TWELVE MONTHS ENDED
	SEPTEMBER 30						SEPTEMBER 30
	2017			2016			2017			2016
CASH FLOW FROM OPERATING ACTIVITIES:
Net income	$	97,546		$	87,361		$	163,240		$	154,059
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		189,089			217,764			260,457			286,977
Deferred income taxes		49,409			43,702			74,439			86,526
Changes in current assets and liabilities:
Accounts receivable, net of allowances		(15,330	)		28,531			(13,765	)		(17,889	)
Accrued utility revenue		42,100			41,700			(1,100	)		(800	)
Deferred purchased gas costs		(79,127	)		81,389			(114,658	)		79,460
Accounts payable		(26,771	)		(24,942	)		19,866			10,445
Accrued taxes		4,689			(7,055	)		38,084			(11,033	)
Other current assets and liabilities		43,044			12,022			3,590			22,034
Gains on sale		(1,452	)		(4,117	)		(4,483	)		(4,200	)
Changes in undistributed stock compensation		9,199			4,347			10,308			5,142
AFUDC		(2,077	)		(1,893	)		(2,473	)		(2,890	)
Changes in other assets and deferred charges		(14,470	)		3,926			(1,436	)		4,183
Changes in other liabilities and deferred credits		3,395			(4,813	)		(10,239	)		702

Net cash provided by operating activities		299,244			477,922			421,830			612,716

CASH FLOW FROM INVESTING ACTIVITIES:
Construction expenditures and property additions		(449,998	)		(404,388	)		(575,141	)		(555,819	)
Acquisition of businesses, net of cash acquired		—			(17,000	)		—			(17,000	)
Changes in customer advances		(1,951	)		5,445			504			9,445
Miscellaneous inflows		9,160			7,965			14,234			4,726

Net cash used in investing activities		(442,789	)		(407,978	)		(560,403	)		(558,648	)

CASH FLOW FROM FINANCING ACTIVITIES:
Issuance of common stock, net		11,563			530			11,505			507
Dividends paid		(68,503	)		(61,950	)		(89,870	)		(81,138	)
Centuri distribution to redeemable noncontrolling interest		(204	)		(99	)		(544	)		(198	)
Issuance of long-term debt, net		104,308			408,946			119,308			420,946
Retirement of long-term debt		(100,240	)		(196,351	)		(159,162	)		(240,999	)
Change in credit facility and commercial paper		145,000			(150,000	)		150,000			(97,000	)
Change in short-term debt		110,500			(18,000	)		110,500			—
Principal payments on capital lease obligations		(796	)		(1,125	)		(1,025	)		(1,449	)
Redemption of Centuri shares from noncontrolling parties		(23,000	)		—			(23,000	)		—
Withholding remittance—share-based compensation		(3,176	)		(2,119	)		(3,176	)		(2,164	)
Other		(1,104	)		(605	)		(2,068	)		(60	)

Net cash provided by (used in) financing activities		174,348			(20,773	)		112,468			(1,555	)

Effects of currency translation on cash and cash equivalents		283			(14	)		103			(318	)

Change in cash and cash equivalents		31,086			49,157			(26,002	)		52,195
Cash and cash equivalents at beginning of period		28,066			35,997			85,154			32,959

Cash and cash equivalents at end of period	$	59,152		$	85,154		$	59,152		$	85,154

Supplemental information:
Interest paid, net of amounts capitalized	$	45,771		$	47,134		$	66,077		$	68,445
Income taxes paid (received)		3,687			6,530			(21,875	)		9,899


	SEPTEMBER 30,			DECEMBER 31,
	2017			2016
ASSETS
Utility plant:
Gas plant	$	6,440,547		$	6,193,564
Less: accumulated depreciation		(2,218,796	)		(2,172,966	)
Acquisition adjustments, net		81			196
Construction work in progress		164,030			111,177

Net utility plant		4,385,862			4,131,971

Other property and investments		115,841			108,569

Current assets:
Cash and cash equivalents		46,467			19,024
Accounts receivable, net of allowances		68,028			111,845
Accrued utility revenue		34,100			76,200
Income taxes receivable, net		6,440			4,455
Deferred purchased gas costs		6,230			2,608
Prepaids and other current assets		118,587			126,363

Total current assets		279,852			340,495

Noncurrent assets:
Goodwill		10,095			10,095
Deferred charges and other assets		393,942			410,625
Discontinued operations—construction services—assets		—			579,371

Total noncurrent assets		404,037			1,000,091

Total assets	$	5,185,592		$	5,581,126

CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock	$	49,112		$	49,112
Additionalpaid-in capital		917,581			897,346
Accumulated other comprehensive income (loss), net		(42,299	)		(45,639	)
Retained earnings		606,007			767,061

Total Southwest Gas Corporation equity		1,530,401			1,667,880
Discontinued operations—construction servicesnon-owner equity		—			15,983
Long-term debt, less current maturities		1,520,790			1,375,080

Total capitalization		3,051,191			3,058,943

Current liabilities:
Current maturities of long-term debt		—			25,000
Short-term debt		83,000			—
Accounts payable		92,257			138,229
Customer deposits		70,162			72,296
Accrued general taxes		48,998			42,921
Accrued interest		24,406			17,395
Deferred purchased gas costs		14,971			90,476
Payable to parent		2,560			—
Other current liabilities		109,705			95,999

Total current liabilities		446,059			482,316

Deferred income taxes and other credits:
Deferred income taxes and investment tax credits, net		853,682			806,109
Accumulated removal costs		312,000			308,000
Other deferred credits and other long-term liabilities		522,660			545,143
Discontinued operations—construction services—liabilities		—			380,615

Total deferred income taxes and other credits		1,688,342			2,039,867

Total capitalization and liabilities	$	5,185,592		$	5,581,126


(In thousands of dollars)	Natural Gas Operations		Construction Services		Consolidated
December 31, 2016	$	10,095	$	129,888	$	139,983
Foreign currency translation adjustment		—		7,882		7,882

September 30, 2017	$	10,095	$	137,770	$	147,865


	September 30, 2017			December 31, 2016
Centuri property and equipment	$	493,599		$	451,114
Centuri accumulated provision for depreciation and amortization		(251,831	)		(228,374	)
Net cash surrender value of COLI policies		114,052			106,744
Other property		13,483			12,859

Total	$	369,303		$	342,343


	Qualified Retirement Plan
	Period Ended September 30,
	Three Months						Nine Months						Twelve Months
	2017			2016			2017			2016			2017			2016
(Thousands of dollars)
Service cost	$	5,848		$	5,708		$	17,544		$	17,125		$	23,252		$	23,406
Interest cost		11,520			11,507			34,561			34,520			46,068			45,577
Expected return on plan assets		(13,799	)		(14,140	)		(41,397	)		(42,419	)		(55,536	)		(56,871	)
Amortization of net actuarial loss		6,001			6,317			18,003			18,950			24,319			27,136

Net periodic benefit cost	$	9,570		$	9,392		$	28,711		$	28,176		$	38,103		$	39,248


	SERP
	Period Ended September 30,
	Three Months						Nine Months						Twelve Months
	2017			2016			2017			2016			2017			2016
(Thousands of dollars)
Service cost	$	77		$	83		$	232		$	248		$	315		$	328
Interest cost		471			464			1,413			1,394			1,878			1,818
Amortization of net actuarial loss		361			346			1,081			1,038			1,426			1,361

Net periodic benefit cost	$	909		$	893		$	2,726		$	2,680		$	3,619		$	3,507


	PBOP
	Period Ended September 30,
	Three Months						Nine Months						Twelve Months
	2017			2016			2017			2016			2017			2016
(Thousands of dollars)
Service cost	$	367		$	375		$	1,101		$	1,124		$	1,476		$	1,534
Interest cost		808			795			2,424			2,386			3,218			3,136
Expected return on plan assets		(839	)		(787	)		(2,518	)		(2,362	)		(3,305	)		(3,228	)
Amortization of prior service costs		333			333			1,001			1,001			1,335			1,335
Amortization of net actuarial loss		—			104			—			312			105			398

Net periodic benefit cost	$	669		$	820		$	2,008		$	2,461		$	2,829		$	3,175


September 30, 2017 Instrument	Balance Sheet Location	Asset Derivatives		Liability Derivatives			Net Total
Swaps	Prepaids and other current assets	$	56	$	(22	)	$	34
Swaps	Other current liabilities		27		(1,899	)		(1,872	)
Swaps	Other deferred credits		1		(768	)		(767	)

Total		$	84	$	(2,689	)	$	(2,605	)


December 31, 2016 Instrument	Balance Sheet Location	Asset Derivatives		Liability Derivatives			Net Total
Swaps	Deferred charges and other assets	$	899	$	(54	)	$	845
Swaps	Prepaids and other current assets		3,551		(19	)		3,532

Total		$	4,450	$	(73	)	$	4,377


	September 30, 2017					December 31, 2016
	Carrying			Market		Carrying			Market
	Amount			Value		Amount			Value
(Thousands of dollars)
Southwest Gas Corporation:
Debentures:
Notes, 4.45%, due 2020	$	125,000		$	130,325	$	125,000		$	129,703
Notes, 6.1%, due 2041		125,000			154,434		125,000			149,734
Notes, 3.875%, due 2022		250,000			258,943		250,000			254,900
Notes, 4.875%, due 2043		250,000			275,168		250,000			266,793
Notes, 3.8%, due 2046		300,000			292,578		300,000			283,029
8% Series, due 2026		75,000			97,218		75,000			94,691
Medium-term notes, 7.59% series, due 2017		—			—		25,000			25,040
Medium-term notes, 7.78% series, due 2022		25,000			29,174		25,000			29,290
Medium-term notes, 7.92% series, due 2027		25,000			31,964		25,000			31,905
Medium-term notes, 6.76% series, due 2027		7,500			8,920		7,500			8,769
Unamortized discount and debt issuance costs		(9,498	)				(9,931	)

		1,173,002					1,197,569

Revolving credit facility and commercial paper		150,000			150,000		5,000			5,000

Industrial development revenue bonds:
Variable-rate bonds:
Tax-exempt Series A, due 2028		50,000			50,000		50,000			50,000
2003 Series A, due 2038		50,000			50,000		50,000			50,000
2008 Series A, due 2038		50,000			50,000		50,000			50,000
2009 Series A, due 2039		50,000			50,000		50,000			50,000
Unamortized discount and debt issuance costs		(2,212	)				(2,489	)

		197,788					197,511

Less: current maturities		—					(25,000	)

Long-term debt, less current maturities - Southwest Gas Corporation	$	1,520,790				$	1,375,080

Centuri:
Centuri term loan facility	$	107,250			107,403	$	106,700			106,819
Unamortized debt issuance costs		(383	)				(516	)

		106,867					106,184
Centuri secured revolving credit facility		81,250			81,402		41,185			41,292
Centuri other debt obligations		51,527			51,978		52,635			52,840
Less: current maturities		(28,453	)				(25,101	)

Long-term debt, less current maturities - Centuri	$	211,191				$	174,903

Consolidated Southwest Gas Holdings, Inc.:
Southwest Gas Corporation long-term debt	$	1,520,790				$	1,400,080
Centuri long-term debt		239,644					200,004
Less: current maturities		(28,453	)				(50,101	)

Long-term debt, less current maturities - Southwest Gas Holdings, Inc.	$	1,731,981				$	1,549,983


	Southwest Gas Holdings, Inc. Equity
							Accumulated												Redeemable
					Additional		Other						Non-						Noncontrolling
	Common Stock				Paid-in		Comprehensive			Retained			controlling						Interest
(In thousands, except per share amounts)	Shares		Amount		Capital		Income (Loss)			Earnings			Interest			Total			(Temporary Equity)
DECEMBER 31, 2016		47,482	$	49,112	$	903,123	$	(48,008	)	$	759,263		$	(2,217	)	$	1,661,273		$	22,590
Common stock issuances		250		250		21,090											21,340
Net income (loss)											97,376			(78	)		97,298			248
Redemption value adjustments											(355	)					(355	)		355
Foreign currency exchange translation adj.								1,850									1,850			11
Redemption of Centuri shares from noncontrolling parties																				(23,000	)
Other comprehensive income (loss):
Net actuarial gain (loss) arising during period, less amortization of unamortized benefit plan cost, net of tax								1,786									1,786
Amounts reclassified to net income, net of tax (FSIRS)								1,554									1,554
Centuri dividend to redeemable noncontrolling interest																				(204	)
Dividends declared
Common: $1.485 per share											(71,350	)					(71,350	)

SEPTEMBER 30, 2017		47,732	$	49,362	$	924,213	$	(42,818	)	$	784,934		$	(2,295	)	$	1,713,396		$	—


	Three Months Ended September 30, 2017									Three Months Ended September 30, 2016
	Before-			Tax			Net-of-			Before-			Tax			Net-of-
	Tax			(Expense)			Tax			Tax			(Expense)			Tax
	Amount			or Benefit (1)			Amount			Amount			or Benefit (1)			Amount
Defined benefit pension plans:
Amortization of prior service cost	$	333		$	(126	)	$	207		$	333		$	(126	)	$	207
Amortization of net actuarial (gain)/loss		6,362			(2,418	)		3,944			6,767			(2,571	)		4,196
Regulatory adjustment		(5,734	)		2,179			(3,555	)		(6,122	)		2,326			(3,796	)

Pension plans other comprehensive income (loss)		961			(365	)		596			978			(371	)		607
FSIRS (designated hedging activities):
Amounts reclassifed into net income		835			(317	)		518			835			(317	)		518

FSIRS other comprehensive income		835			(317	)		518			835			(317	)		518

Total other comprehensive income (loss) - Southwest Gas Corporation		1,796			(682	)		1,114			1,813			(688	)		1,125

Foreign currency translation adjustments:
Translation adjustments		1,012			—			1,012			(238	)		—			(238	)

Foreign currency other comprehensive income (loss)		1,012			—			1,012			(238	)		—			(238	)

Total other comprehensive income (loss) - Southwest Gas Holdings, Inc.	$	2,808		$	(682	)	$	2,126		$	1,575		$	(688	)	$	887


	Nine Months Ended September 30, 2017									Nine Months Ended September 30, 2017
	Before-			Tax			Net-of-			Before-			Tax			Net-of-
	Tax			(Expense)			Tax			Tax			(Expense)			Tax
	Amount			or Benefit (1)			Amount			Amount			or Benefit (1)			Amount
Defined benefit pension plans:
Amortization of prior service cost	$	1,001		$	(380	)	$	621		$	1,001		$	(380	)	$	621
Amortization of net actuarial (gain)/loss		19,084			(7,252	)		11,832			20,300			(7,714	)		12,586
Regulatory adjustment		(17,204	)		6,537			(10,667	)		(18,368	)		6,980			(11,388	)

Pension plans other comprehensive income (loss)		2,881			(1,095	)		1,786			2,933			(1,114	)		1,819
FSIRS (designated hedging activities):
Amounts reclassifed into net income		2,507			(953	)		1,554			2,508			(952	)		1,556

FSIRS other comprehensive income		2,507			(953	)		1,554			2,508			(952	)		1,556

Total other comprehensive income (loss)—Southwest Gas Corporation		5,388			(2,048	)		3,340			5,441			(2,066	)		3,375

Foreign currency translation adjustments:
Translation adjustments		1,861			—			1,861			614			—			614

Foreign currency other comprehensive income (loss)		1,861			—			1,861			614			—			614

Total other comprehensive income (loss)	$	7,249		$	(2,048	)	$	5,201		$	6,055		$	(2,066	)	$	3,989


	Defined Benefit Plans									FSIRS
	Before-Tax			Tax (Expense) Benefit (8)			After-Tax			Before-Tax			Tax (Expense) Benefit (8)			After-Tax			AOCI
Beginning Balance AOCI December 31, 2016	$	(57,613	)	$	21,893		$	(35,720	)	$	(15,999	)	$	6,080		$	(9,919	)	$	(45,639	)

FSIRS amounts reclassified from AOCI (5)		—			—			—			2,507			(953	)		1,554			1,554
Amortization of prior service cost (6)		1,001			(380	)		621			—			—			—			621
Amortization of net actuarial loss (6)		19,084			(7,252	)		11,832			—			—			—			11,832
Regulatory adjustment (7)		(17,204	)		6,537			(10,667	)		—			—			—			(10,667	)

Net current period other comprehensive income (loss) attributable to Southwest Gas Corporation		2,881			(1,095	)		1,786			2,507			(953	)		1,554			3,340

Ending Balance AOCI September 30, 2017	$	(54,732	)	$	20,798		$	(33,934	)	$	(13,492	)	$	5,127		$	(8,365	)	$	(42,299	)


	Redeemable Noncontrolling Interest
(Thousands of dollars):
Balance, December 31, 2016	$	22,590
Net income attributable to redeemable noncontrolling interest		248
Foreign currency exchange translation adjustment		11
Centuri dividend to redeemable noncontrolling interest		(204	)
Adjustment to redemption value		355
Redemption of Centuri shares from noncontrolling parties		(23,000	)

Balance, September 30, 2017	$	—


(Thousands of dollars)	December 31, 2016
Construction services equity	$	(4,390	)
Construction services noncontrolling interest		(2,217	)
Construction services redeemable noncontrolling interest		22,590

Discontinued operations - construction servicesnon-owner equity	$	15,983


	Three		Nine		Twelve		Twelve
	Months Ended		Months Ended		Months Ended		Months Ended
(Thousands of dollars)	September 30, 2016		September 30, 2016		September 30, 2017		September 30, 2016
Construction revenues	$	339,790	$	838,038	$	301,040	$	1,127,982
Operating expenses:
Construction expenses		300,611		757,919		266,504		1,009,188
Depreciation and amortization		13,409		43,351		12,318		58,368

Operating income		25,770		36,768		22,218		60,426
Other income (deductions)		44		44		1,149		1,246
Net interest deductions		1,794		4,945		1,718		6,738

Income before income taxes		24,020		31,867		21,649		54,934
Income tax expense		8,708		12,042		7,842		20,711

Net income		15,312		19,825		13,807		34,223
Net income attributable to noncontrolling interests		435		500		514		1,079

Discontinued operations - construction services - net income	$	14,877	$	19,325	$	13,293	$	33,144


	Three Months Ended September 30,
	2017			2016
	(Thousands of dollars)
Gas operating revenues	$	213,059		$	200,179
Net cost of gas sold		45,539			39,056

Operating margin		167,520			161,123
Operations and maintenance expense		102,215			102,438
Depreciation and amortization		46,194			56,436
Taxes other than income taxes		14,046			12,480

Operating income (loss)		5,065			(10,231	)
Other income (deductions)		3,081			2,521
Net interest deductions		17,421			16,364

Income (loss) before income taxes		(9,275	)		(24,074	)
Income tax expense (benefit)		(5,251	)		(11,669	)

Contribution to consolidated net income (loss)	$	(4,024	)	$	(12,405	)


	Nine Months Ended September 30,
	2017		2016
	(Thousands of dollars)
Gas operating revenues	$	935,823	$	980,927
Net cost of gas sold		261,839		324,072

Operating margin		673,984		656,855
Operations and maintenance expense		313,395		301,979
Depreciation and amortization		153,643		174,413
Taxes other than income taxes		43,325		39,480

Operating income		163,621		140,983
Other income (deductions)		8,744		6,712
Net interest deductions		51,622		49,155

Income before income taxes		120,743		98,540
Income tax expense		38,307		31,004

Contribution to consolidated net income	$	82,436	$	67,536


	Twelve Months Ended September 30,
	2017		2016
	(Thousands of dollars)
Gas operating revenues	$	1,276,308	$	1,376,388
Net cost of gas sold		334,888		460,836

Operating margin		941,420		915,552
Operations and maintenance expense		413,140		400,222
Depreciation and amortization		212,693		228,609
Taxes other than income taxes		56,221		51,810

Operating income		259,366		234,911
Other income (deductions)		10,308		9,615
Net interest deductions		69,464		65,146

Income before income taxes		200,210		179,380
Income tax expense		65,887		59,544

Contribution to consolidated net income	$	134,323	$	119,836


	Nine Months Ended September 30,
	2017		2016
	(Thousands of dollars)
Construction revenues	$	872,536	$	838,038
Operating expenses:
Construction expenses		806,586		757,919
Depreciation and amortization		35,446		43,351

Operating income		30,504		36,768
Other income (deductions)		38		44
Net interest deductions		5,095		4,945

Income before income taxes		25,447		31,867
Income tax expense		9,560		12,042

Net income		15,887		19,825
Net income attributable to noncontrolling interests		170		500

Contribution to consolidated net income attributable to Centuri	$	15,717	$	19,325


	Twelve Months Ended September 30,
	2017		2016
	(Thousands of dollars)
Construction revenues	$	1,173,576	$	1,127,982
Operating expenses:
Construction expenses		1,073,090		1,009,188
Depreciation and amortization		47,764		58,368

Operating income		52,722		60,426
Other income (deductions)		1,187		1,246
Net interest deductions		6,813		6,738

Income before income taxes		47,096		54,934
Income tax expense		17,402		20,711

Net income		29,694		34,223
Net income attributable to noncontrolling interests		684		1,079

Contribution to consolidated net income attributable to Centuri	$	29,010	$	33,144


	For the Twelve Months Ended
	September 30, 2017		December 31, 2016
Ratio of earnings to fixed charges		3.50		3.46