QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| Exact name of registrant as specified in its charter and
| State of
| I.R.S.
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001-37976 | Southwest Gas Holdings, Inc. | ||||||||||||||||||||||||||||
| Delaware | 81-3881866 | |||||||||||||||||||||||||||
8360 S. Durango Drive | |||||||||||||||||||||||||||||
Post Office Box 98510 | |||||||||||||||||||||||||||||
Las Vegas, | Nevada | 89193-8510 | |||||||||||||||||||||||||||
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| 876-7237 | ||||||||||||||||||||||||||||
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1-7850 | Southwest Gas Corporation | California | 88-0085720 | ||||||||||||||||||||||||||
8360 S. Durango Drive | |||||||||||||||||||||||||||||
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 |
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||||||||||||||||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||||||||||||||||
Emerging growth company | ☐ |
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||||||||||||||||
Non-accelerated filer | ☒ | Smaller reporting company | ☐ | |||||||||||||||||
Emerging growth company | ☐ |
April 28, 2023.
April 28, 2023.
SOUTHWEST GAS HOLDINGS, INC. | Form 10-Q | |||||||
SOUTHWEST GAS CORPORATION |
2
2 |
SOUTHWEST GAS HOLDINGS, INC. | Form 10-Q | |||||||
SOUTHWEST GAS CORPORATION |
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 | ||||||
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Net utility plant | 4,385,862 | 4,131,971 | ||||||
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Other property and investments | 369,303 | 342,343 | ||||||
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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 | ||||||
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Total current assets | 538,918 | 533,307 | ||||||
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Noncurrent assets: | ||||||||
Goodwill | 147,865 | 139,983 | ||||||
Deferred income taxes | 1,467 | 1,288 | ||||||
Deferred charges and other assets | 411,655 | 432,234 | ||||||
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Total noncurrent assets | 560,987 | 573,505 | ||||||
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Total assets | $ | 5,855,070 | $ | 5,581,126 | ||||
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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 | ||||||
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Total Southwest Gas Holdings, Inc. equity | 1,715,691 | 1,663,490 | ||||||
Noncontrolling interest | (2,295 | ) | (2,217 | ) | ||||
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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 | ||||||
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Total capitalization | 3,445,377 | 3,233,846 | ||||||
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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 | ||||||
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Total current liabilities | 656,406 | 628,375 | ||||||
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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 | ||||||
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Total deferred income taxes and other credits | 1,753,287 | 1,718,905 | ||||||
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Total capitalization and liabilities | $ | 5,855,070 | $ | 5,581,126 | ||||
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March 31, 2023 | December 31, 2022 | |||||||||||||
ASSETS | ||||||||||||||
Regulated operations plant: | ||||||||||||||
Gas plant | $ | 9,583,630 | $ | 9,453,907 | ||||||||||
Less: accumulated depreciation | (2,712,093) | (2,674,157) | ||||||||||||
Construction work in progress | 250,892 | 244,750 | ||||||||||||
Net regulated operations plant | 7,122,429 | 7,024,500 | ||||||||||||
Other property and investments, net | 1,250,327 | 1,281,172 | ||||||||||||
Current assets: | ||||||||||||||
Cash and cash equivalents | 82,085 | 123,078 | ||||||||||||
Accounts receivable, net of allowances | 903,262 | 866,246 | ||||||||||||
Accrued utility revenue | 56,900 | 88,100 | ||||||||||||
Income taxes receivable, net | 8,136 | 8,738 | ||||||||||||
Deferred purchased gas costs | 970,339 | 450,120 | ||||||||||||
Prepaid and other current assets | 210,309 | 433,850 | ||||||||||||
Current assets held for sale | 26,993 | 1,737,530 | ||||||||||||
Total current assets | 2,258,024 | 3,707,662 | ||||||||||||
Noncurrent assets: | ||||||||||||||
Goodwill | 787,334 | 787,250 | ||||||||||||
Deferred income taxes | 115 | 82 | ||||||||||||
Deferred charges and other assets | 391,944 | 395,948 | ||||||||||||
Total noncurrent assets | 1,179,393 | 1,183,280 | ||||||||||||
Total assets | $ | 11,810,173 | $ | 13,196,614 | ||||||||||
CAPITALIZATION AND LIABILITIES | ||||||||||||||
Capitalization: | ||||||||||||||
Common stock, $1 par (authorized - 120,000,000 shares; issued and outstanding - 71,330,991 and 67,119,143 shares) | $ | 72,961 | $ | 68,749 | ||||||||||
Additional paid-in capital | 2,524,631 | 2,287,183 | ||||||||||||
Accumulated other comprehensive loss, net | (43,949) | (44,242) | ||||||||||||
Retained earnings | 742,513 | 747,069 | ||||||||||||
Total equity | 3,296,156 | 3,058,759 | ||||||||||||
Redeemable noncontrolling interests | 127,026 | 159,349 | ||||||||||||
Long-term debt, less current maturities | 4,577,600 | 4,403,299 | ||||||||||||
Total capitalization | 8,000,782 | 7,621,407 | ||||||||||||
Current liabilities: | ||||||||||||||
Current maturities of long-term debt | 41,907 | 44,557 | ||||||||||||
Short-term debt | 467,500 | 1,542,806 | ||||||||||||
Accounts payable | 310,748 | 662,090 | ||||||||||||
Customer deposits | 50,350 | 51,182 | ||||||||||||
Income taxes payable, net | 739 | 2,690 | ||||||||||||
Accrued general taxes | 101,579 | 67,094 | ||||||||||||
Accrued interest | 45,641 | 38,556 | ||||||||||||
Other current liabilities | 592,022 | 369,743 | ||||||||||||
Current liabilities held for sale | — | 644,245 | ||||||||||||
Total current liabilities | 1,610,486 | 3,422,963 | ||||||||||||
Deferred income taxes and other credits: | ||||||||||||||
Deferred income taxes and investment tax credits, net | 733,199 | 682,067 | ||||||||||||
Accumulated removal costs | 450,000 | 445,000 | ||||||||||||
Other deferred credits and other long-term liabilities | 1,015,706 | 1,025,177 | ||||||||||||
Total deferred income taxes and other credits | 2,198,905 | 2,152,244 | ||||||||||||
Total capitalization and liabilities | $ | 11,810,173 | $ | 13,196,614 |
3
3 |
SOUTHWEST GAS HOLDINGS, INC. | Form 10-Q | |||||||
SOUTHWEST GAS CORPORATION |
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 | ||||||||||||||||||
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Total operating revenues | 593,153 | 539,969 | 1,808,359 | 1,818,965 | 2,449,884 | 2,504,370 | ||||||||||||||||||
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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 | ||||||||||||||||||
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Total operating expenses | 563,021 | 524,430 | 1,615,327 | 1,641,214 | 2,138,889 | 2,209,033 | ||||||||||||||||||
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Operating income | 30,132 | 15,539 | 193,032 | 177,751 | 310,995 | 295,337 | ||||||||||||||||||
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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 | ||||||||||||||||||
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Total other income and (expenses) | (16,618 | ) | (15,593 | ) | (48,075 | ) | (47,344 | ) | (64,922 | ) | (61,023 | ) | ||||||||||||
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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 | |||||||||||||||||
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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 | ||||||||||||||||||
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Net income attributable to Southwest Gas Holdings, Inc. | $ | 10,204 | $ | 2,472 | $ | 97,376 | $ | 86,861 | $ | 162,556 | $ | 152,980 | ||||||||||||
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Basic earnings per share | $ | 0.21 | $ | 0.05 | $ | 2.05 | $ | 1.83 | $ | 3.42 | $ | 3.22 | ||||||||||||
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Diluted earnings per share | $ | 0.21 | $ | 0.05 | $ | 2.03 | $ | 1.82 | $ | 3.39 | $ | 3.20 | ||||||||||||
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Dividends declared per share | $ | 0.495 | $ | 0.450 | $ | 1.485 | $ | 1.350 | $ | 1.935 | $ | 1.755 | ||||||||||||
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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, | |||||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
Operating revenues: | ||||||||||||||||||||||||||
Regulated operations revenues | $ | 950,011 | $ | 743,532 | $ | 2,406,161 | $ | 1,743,390 | ||||||||||||||||||
Utility infrastructure services revenues | 653,293 | 523,877 | 2,889,743 | 2,318,563 | ||||||||||||||||||||||
Total operating revenues | 1,603,304 | 1,267,409 | 5,295,904 | 4,061,953 | ||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||
Net cost of gas sold | 507,537 | 298,918 | 1,007,679 | 573,804 | ||||||||||||||||||||||
Operations and maintenance | 148,908 | 149,303 | 636,371 | 515,759 | ||||||||||||||||||||||
Depreciation and amortization | 112,520 | 122,646 | 460,329 | 400,245 | ||||||||||||||||||||||
Taxes other than income taxes | 24,230 | 24,816 | 92,797 | 84,472 | ||||||||||||||||||||||
Utility infrastructure services expenses | 603,680 | 503,232 | 2,629,766 | 2,123,085 | ||||||||||||||||||||||
Goodwill impairment and loss on sale | 71,230 | — | 526,655 | — | ||||||||||||||||||||||
Total operating expenses | 1,468,105 | 1,098,915 | 5,353,597 | 3,697,365 | ||||||||||||||||||||||
Operating income (loss) | 135,199 | 168,494 | (57,693) | 364,588 | ||||||||||||||||||||||
Other income and (expenses): | ||||||||||||||||||||||||||
Net interest deductions | (77,334) | (48,363) | (271,721) | (143,597) | ||||||||||||||||||||||
Other income (deductions) | 18,460 | 1,244 | 11,027 | (2,703) | ||||||||||||||||||||||
Total other income and (expenses) | (58,874) | (47,119) | (260,694) | (146,300) | ||||||||||||||||||||||
Income (loss) before income taxes | 76,325 | 121,375 | (318,387) | 218,288 | ||||||||||||||||||||||
Income tax expense (benefit) | 28,675 | 24,125 | (71,103) | 32,681 | ||||||||||||||||||||||
Net income (loss) | 47,650 | 97,250 | (247,284) | 185,607 | ||||||||||||||||||||||
Net income attributable to noncontrolling interests | 1,739 | 1,072 | 6,273 | 5,943 | ||||||||||||||||||||||
Net income (loss) attributable to Southwest Gas Holdings, Inc. | $ | 45,911 | $ | 96,178 | $ | (253,557) | $ | 179,664 | ||||||||||||||||||
Earnings (loss) per share: | ||||||||||||||||||||||||||
Basic | $ | 0.67 | $ | 1.58 | $ | (3.76) | $ | 3.00 | ||||||||||||||||||
Diluted | $ | 0.67 | $ | 1.58 | $ | (3.76) | $ | 2.99 | ||||||||||||||||||
Weighted average shares: | ||||||||||||||||||||||||||
Basic | 68,265 | 60,737 | 67,413 | 59,919 | ||||||||||||||||||||||
Diluted | 68,419 | 60,854 | 67,413 | 60,044 |
4
4 |
SOUTHWEST GAS HOLDINGS, INC. | Form 10-Q | |||||||
SOUTHWEST GAS CORPORATION |
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 | ||||||||||||
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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 | ) | ||||||||||||
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Net defined benefit pension plans | 596 | 607 | 1,786 | 1,819 | (4 | ) | (583 | ) | ||||||||||||||||
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Forward-starting interest rate swaps: | ||||||||||||||||||||||||
Amounts reclassified into net income | 518 | 518 | 1,554 | 1,556 | 2,073 | �� | 2,073 | |||||||||||||||||
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Net forward-starting interest rate swaps | 518 | 518 | 1,554 | 1,556 | 2,073 | 2,073 | ||||||||||||||||||
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Foreign currency translation adjustments | 1,012 | (238 | ) | 1,861 | 614 | 1,408 | 233 | |||||||||||||||||
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Total other comprehensive income, net of tax | 2,126 | 887 | 5,201 | 3,989 | 3,477 | 1,723 | ||||||||||||||||||
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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 | ||||||||||||||||||
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Comprehensive income attributable to Southwest Gas Holdings, Inc. | $ | 12,348 | $ | 3,367 | $ | 102,566 | $ | 90,829 | $ | 166,038 | $ | 154,693 | ||||||||||||
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Three Months Ended March 31, | Twelve Months Ended March 31, | |||||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
Net income (loss) | $ | 47,650 | $ | 97,250 | $ | (247,284) | $ | 185,607 | ||||||||||||||||||
Other comprehensive income (loss), net of tax | ||||||||||||||||||||||||||
Defined benefit pension plans: | ||||||||||||||||||||||||||
Net actuarial gain (loss) | — | — | 3,099 | 44,974 | ||||||||||||||||||||||
Amortization of prior service cost | 33 | 33 | 133 | 580 | ||||||||||||||||||||||
Amortization of net actuarial loss | 253 | 6,616 | 20,098 | 32,036 | ||||||||||||||||||||||
Regulatory adjustment | (90) | (5,523) | (16,024) | (65,273) | ||||||||||||||||||||||
Net defined benefit pension plans | 196 | 1,126 | 7,306 | 12,317 | ||||||||||||||||||||||
Forward-starting interest rate swaps (“FSIRS”): | ||||||||||||||||||||||||||
Amounts reclassified into net income | — | 416 | — | 1,655 | ||||||||||||||||||||||
Net forward-starting interest rate swaps | — | 416 | — | 1,655 | ||||||||||||||||||||||
Foreign currency translation adjustments | 97 | 1,247 | (7,283) | 444 | ||||||||||||||||||||||
Total other comprehensive income, net of tax | 293 | 2,789 | 23 | 14,416 | ||||||||||||||||||||||
Comprehensive income (loss) | 47,943 | 100,039 | (247,261) | 200,023 | ||||||||||||||||||||||
Comprehensive income attributable to noncontrolling interests | 1,739 | 1,072 | 6,273 | 5,943 | ||||||||||||||||||||||
Comprehensive income (loss) attributable to Southwest Gas Holdings, Inc. | $ | 46,204 | $ | 98,967 | $ | (253,534) | $ | 194,080 |
5
5 |
SOUTHWEST GAS HOLDINGS, INC. | Form 10-Q | |||||||
SOUTHWEST GAS CORPORATION |
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, | |||||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
CASH FLOW FROM OPERATING ACTIVITIES: | ||||||||||||||||||||||||||
Net income (loss) | $ | 47,650 | $ | 97,250 | $ | (247,284) | $ | 185,607 | ||||||||||||||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||||||||||||||||
Depreciation and amortization | 112,520 | 122,646 | 460,329 | 400,245 | ||||||||||||||||||||||
Impairment of assets and other charges | 71,230 | — | 526,655 | — | ||||||||||||||||||||||
Deferred income taxes | 36,712 | 32,346 | (67,682) | 70,232 | ||||||||||||||||||||||
Gains on sale of property and equipment | (661) | (1,916) | (6,610) | (7,313) | ||||||||||||||||||||||
Changes in undistributed stock compensation | 3,436 | 4,180 | 8,702 | 9,816 | ||||||||||||||||||||||
Equity AFUDC | (82) | (258) | (289) | 723 | ||||||||||||||||||||||
Changes in current assets and liabilities: | ||||||||||||||||||||||||||
Accounts receivable, net of allowances | (40,185) | (44,971) | (188,989) | (139,417) | ||||||||||||||||||||||
Accrued utility revenue | 31,200 | 32,900 | (4,900) | (1,500) | ||||||||||||||||||||||
Deferred purchased gas costs | (535,224) | (82,248) | (600,191) | (134,507) | ||||||||||||||||||||||
Accounts payable | (305,272) | (82,952) | 71,589 | 8,621 | ||||||||||||||||||||||
Accrued taxes | 34,950 | 33,964 | 18,915 | (7,397) | ||||||||||||||||||||||
Other current assets and liabilities | 371,035 | 79,680 | 83,502 | (4,274) | ||||||||||||||||||||||
Changes in deferred charges and other assets | (1,565) | (297) | 15,618 | (3,459) | ||||||||||||||||||||||
Changes in other liabilities and deferred credits | (11,486) | (3,704) | (34,267) | (26,917) | ||||||||||||||||||||||
Net cash provided by (used in) operating activities | (185,742) | 186,620 | 35,098 | 350,460 | ||||||||||||||||||||||
CASH FLOW FROM INVESTING ACTIVITIES: | ||||||||||||||||||||||||||
Construction expenditures and property additions | (219,124) | (162,796) | (915,749) | (725,713) | ||||||||||||||||||||||
Acquisition of businesses, net of cash acquired | — | — | (18,809) | (2,354,260) | ||||||||||||||||||||||
Proceeds from the sale of business, net of cash sold | 1,058,272 | — | 1,058,272 | — | ||||||||||||||||||||||
Changes in customer advances | (6,608) | 7,693 | 7,205 | 19,381 | ||||||||||||||||||||||
Other | 3,125 | 893 | 20,054 | 15,586 | ||||||||||||||||||||||
Net cash provided by (used in) investing activities | 835,665 | (154,210) | 150,973 | (3,045,006) | ||||||||||||||||||||||
CASH FLOW FROM FINANCING ACTIVITIES: | ||||||||||||||||||||||||||
Issuance of common stock, net | 239,337 | 453,495 | 247,670 | 618,146 | ||||||||||||||||||||||
Centuri distribution to redeemable noncontrolling interest | — | (39,649) | — | (39,649) | ||||||||||||||||||||||
Dividends paid | (41,631) | (35,970) | (166,224) | (141,573) | ||||||||||||||||||||||
Issuance of long-term debt, net | 305,896 | 709,927 | 663,774 | 2,359,964 | ||||||||||||||||||||||
Retirement of long-term debt | (84,224) | (143,453) | (440,685) | (574,889) | ||||||||||||||||||||||
Change in credit facility and commercial paper | (50,000) | (130,000) | — | (150,000) | ||||||||||||||||||||||
Change in short-term debt | (1,527,746) | (435,000) | (1,458,939) | (686,000) | ||||||||||||||||||||||
Issuance of short-term debt | 450,000 | — | 450,000 | 1,850,000 | ||||||||||||||||||||||
Withholding remittance - share-based compensation | (1,506) | (1,978) | (2,190) | (2,000) | ||||||||||||||||||||||
Other, including principal payments on finance leases | (4,949) | (7,898) | (21,223) | (7,274) | ||||||||||||||||||||||
Net cash provided by (used in) financing activities | (714,823) | 369,474 | (727,817) | 3,226,725 | ||||||||||||||||||||||
Effects of currency translation on cash and cash equivalents | 104 | 85 | (835) | 142 | ||||||||||||||||||||||
Change in cash and cash equivalents | (64,796) | 401,969 | (542,581) | 532,321 | ||||||||||||||||||||||
Cash and cash equivalents included in current assets held for sale at beginning of period | 23,803 | — | — | — | ||||||||||||||||||||||
Cash and cash equivalents at beginning of period | 123,078 | 222,697 | 624,666 | 92,345 | ||||||||||||||||||||||
Cash and cash equivalents at end of period | $ | 82,085 | $ | 624,666 | $ | 82,085 | $ | 624,666 | ||||||||||||||||||
SUPPLEMENTAL INFORMATION: | ||||||||||||||||||||||||||
Interest paid, net of amounts capitalized | $ | 68,018 | $ | 35,262 | $ | 252,581 | $ | 131,311 | ||||||||||||||||||
Income taxes paid, net | $ | 2,381 | $ | 1,408 | $ | 12,974 | $ | 3,965 |
6
6 |
SOUTHWEST GAS HOLDINGS, INC. | Form 10-Q | |||||||
SOUTHWEST GAS CORPORATION |
STATEMENTS OF EQUITY
In thousands, except per share amounts)
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 | ||||
|
|
|
|
Three Months Ended March 31, | |||||||||||||||||
2023 | 2022 | ||||||||||||||||
Common stock shares | |||||||||||||||||
Beginning balances | 67,119 | 60,422 | |||||||||||||||
Common stock issuances | 4,212 | 6,427 | |||||||||||||||
Ending balances | 71,331 | 66,849 | |||||||||||||||
Common stock amount | |||||||||||||||||
Beginning balances | $ | 68,749 | $ | 62,052 | |||||||||||||
Common stock issuances | 4,212 | 6,427 | |||||||||||||||
Ending balances | 72,961 | 68,479 | |||||||||||||||
Additional paid-in capital | |||||||||||||||||
Beginning balances | 2,287,183 | 1,824,216 | |||||||||||||||
Common stock issuances | 237,448 | 449,621 | |||||||||||||||
Ending balances | 2,524,631 | 2,273,837 | |||||||||||||||
Accumulated other comprehensive loss | |||||||||||||||||
Beginning balances | (44,242) | (46,761) | |||||||||||||||
Foreign currency exchange translation adjustment | 97 | 1,247 | |||||||||||||||
Net actuarial gain arising during period, less amortization of unamortized benefit plan cost, net of tax | 196 | 1,126 | |||||||||||||||
FSIRS amounts reclassified to net income, net of tax | — | 416 | |||||||||||||||
Ending balances | (43,949) | (43,972) | |||||||||||||||
Retained earnings | |||||||||||||||||
Beginning balances | 747,069 | 1,114,313 | |||||||||||||||
Net income | 45,911 | 96,178 | |||||||||||||||
Dividends declared | (44,635) | (41,909) | |||||||||||||||
Redemption value adjustments | (5,832) | 22,156 | |||||||||||||||
Ending balances | 742,513 | 1,190,738 | |||||||||||||||
Total equity ending balances | $ | 3,296,156 | $ | 3,489,082 | |||||||||||||
Dividends declared per common share | $ | 0.62 | $ | 0.62 |
7
7 |
SOUTHWEST GAS HOLDINGS, INC. | Form 10-Q | |||||||
SOUTHWEST GAS CORPORATION |
BALANCE SHEETS
Thousands of dollars)
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 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2023 | December 31, 2022 | |||||||||||||
ASSETS | ||||||||||||||
Regulated operations plant: | ||||||||||||||
Gas plant | $ | 9,583,630 | $ | 9,453,907 | ||||||||||
Less: accumulated depreciation | (2,712,093) | (2,674,157) | ||||||||||||
Construction work in progress | 250,892 | 244,750 | ||||||||||||
Net regulated operations plant | 7,122,429 | 7,024,500 | ||||||||||||
Other property and investments, net | 144,586 | 169,397 | ||||||||||||
Current assets: | ||||||||||||||
Cash and cash equivalents | 63,099 | 51,823 | ||||||||||||
Accounts receivable, net of allowance | 300,897 | 234,081 | ||||||||||||
Accrued utility revenue | 56,900 | 88,100 | ||||||||||||
Income taxes receivable, net | 115 | 103 | ||||||||||||
Deferred purchased gas costs | 970,339 | 450,120 | ||||||||||||
Receivable from parent | — | 2,130 | ||||||||||||
Prepaid and other current assets | 183,455 | 401,789 | ||||||||||||
Current assets held for sale | 26,993 | — | ||||||||||||
Total current assets | 1,601,798 | 1,228,146 | ||||||||||||
Noncurrent assets: | ||||||||||||||
Goodwill | 11,155 | 11,155 | ||||||||||||
Deferred charges and other assets | 369,495 | 370,483 | ||||||||||||
Total noncurrent assets | 380,650 | 381,638 | ||||||||||||
Total assets | $ | 9,249,463 | $ | 8,803,681 | ||||||||||
CAPITALIZATION AND LIABILITIES | ||||||||||||||
Capitalization: | ||||||||||||||
Common stock | $ | 49,112 | $ | 49,112 | ||||||||||
Additional paid-in capital | 1,624,919 | 1,622,969 | ||||||||||||
Accumulated other comprehensive loss, net | (38,065) | (38,261) | ||||||||||||
Retained earnings | 1,030,164 | 935,355 | ||||||||||||
Total equity | 2,666,130 | 2,569,175 | ||||||||||||
Long-term debt, less current maturities | 3,497,977 | 3,251,296 | ||||||||||||
Total capitalization | 6,164,107 | 5,820,471 | ||||||||||||
Current liabilities: | ||||||||||||||
Short-term debt | 450,000 | 225,000 | ||||||||||||
Accounts payable | 176,682 | 497,046 | ||||||||||||
Customer deposits | 50,350 | 51,182 | ||||||||||||
Accrued general taxes | 101,579 | 67,094 | ||||||||||||
Accrued interest | 38,489 | 29,569 | ||||||||||||
Payable to parent | 993 | — | ||||||||||||
Other current liabilities | 281,597 | 150,817 | ||||||||||||
Total current liabilities | 1,099,690 | 1,020,708 | ||||||||||||
Deferred income taxes and other credits: | ||||||||||||||
Deferred income taxes and investment tax credits, net | 723,205 | 683,948 | ||||||||||||
Accumulated removal costs | 450,000 | 445,000 | ||||||||||||
Other deferred credits and other long-term liabilities | 812,461 | 833,554 | ||||||||||||
Total deferred income taxes and other credits | 1,985,666 | 1,962,502 | ||||||||||||
Total capitalization and liabilities | $ | 9,249,463 | $ | 8,803,681 |
8
8 |
SOUTHWEST GAS HOLDINGS, INC. | Form 10-Q | |||||||
SOUTHWEST GAS CORPORATION |
Thousands of dollars)
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 | ||||||||||
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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 | ) | ||||||||||||
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Net defined benefit pension plans | 596 | 607 | 1,786 | 1,819 | (4 | ) | (583 | ) | ||||||||||||||||
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Forward-starting interest rate swaps: | ||||||||||||||||||||||||
Amounts reclassified into net income | 518 | 518 | 1,554 | 1,556 | 2,073 | 2,073 | ||||||||||||||||||
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Net forward-starting interest rate swaps | 518 | 518 | 1,554 | 1,556 | 2,073 | 2,073 | ||||||||||||||||||
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Total other comprehensive income, net of tax from continuing operations | 1,114 | 1,125 | 3,340 | 3,375 | 2,069 | 1,490 | ||||||||||||||||||
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Comprehensive income (loss) from continuing operations | (2,910 | ) | (11,280 | ) | 85,776 | 70,911 | 136,392 | 121,326 | ||||||||||||||||
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Discontinued operations—construction services: | ||||||||||||||||||||||||
Net income | — | 14,877 | — | 19,325 | 13,293 | 33,144 | ||||||||||||||||||
Foreign currency translation adjustments | — | (238 | ) | — | 614 | (453 | ) | 233 | ||||||||||||||||
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Comprehensive income | — | 14,639 | — | 19,939 | 12,840 | 33,377 | ||||||||||||||||||
Comprehensive income (loss) attributable to noncontrolling interests | — | (8 | ) | — | 21 | (16 | ) | 10 | ||||||||||||||||
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Comprehensive income attributable to discontinued operations—construction services | — | 14,647 | — | 19,918 | 12,856 | 33,367 | ||||||||||||||||||
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Comprehensive income (loss) | $ | (2,910 | ) | $ | 3,367 | $ | 85,776 | $ | 90,829 | $ | 149,248 | $ | 154,693 | |||||||||||
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Three Months Ended March 31, | Twelve Months Ended March 31, | |||||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
Regulated operations revenues | $ | 914,879 | $ | 676,539 | $ | 2,173,409 | $ | 1,676,397 | ||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||
Net cost of gas sold | 501,169 | 297,121 | 993,264 | 572,007 | ||||||||||||||||||||||
Operations and maintenance | 131,188 | 119,636 | 503,480 | 452,051 | ||||||||||||||||||||||
Depreciation and amortization | 74,650 | 72,114 | 265,579 | 256,814 | ||||||||||||||||||||||
Taxes other than income taxes | 22,740 | 21,652 | 84,285 | 81,308 | ||||||||||||||||||||||
Total operating expenses | 729,747 | 510,523 | 1,846,608 | 1,362,180 | ||||||||||||||||||||||
Operating income | 185,132 | 166,016 | 326,801 | 314,217 | ||||||||||||||||||||||
Other income and (expenses): | ||||||||||||||||||||||||||
Net interest deductions | (38,622) | (26,610) | (127,892) | (102,004) | ||||||||||||||||||||||
Other income (deductions) | 18,443 | 1,315 | 10,244 | (3,794) | ||||||||||||||||||||||
Total other income and (expenses) | (20,179) | (25,295) | (117,648) | (105,798) | ||||||||||||||||||||||
Income before income taxes | 164,953 | 140,721 | 209,153 | 208,419 | ||||||||||||||||||||||
Income tax expense | 30,257 | 28,926 | 31,872 | 28,204 | ||||||||||||||||||||||
Net income | $ | 134,696 | $ | 111,795 | $ | 177,281 | $ | 180,215 |
9
9 |
SOUTHWEST GAS HOLDINGS, INC. | Form 10-Q | |||||||
SOUTHWEST GAS CORPORATION |
COMPREHENSIVE INCOME
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 | ||||||||||||
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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 | ||||||||||
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Net cash provided by operating activities | 272,008 | 444,437 | 336,914 | 534,442 | ||||||||||||
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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 | ||||||||||||
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Net cash used in investing activities | (395,007 | ) | (327,211 | ) | (501,572 | ) | (467,112 | ) | ||||||||
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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 | ) | ||||||||
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Net cash provided by (used in) financing activities | 150,442 | (60,530 | ) | 133,053 | (8,190 | ) | ||||||||||
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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 | ) | |||||||||
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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 | |||||||||||
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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 | ||||||||||||
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Cash and cash equivalents at end of period | $ | 46,467 | $ | 78,072 | $ | 46,467 | $ | 78,072 | ||||||||
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Supplemental information: | ||||||||||||||||
Interest paid, net of amounts capitalized | $ | 40,751 | $ | 42,804 | $ | 59,448 | $ | 63,031 | ||||||||
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Income taxes paid (received) | $ | 4 | $ | (3,055 | ) | $ | (27,952 | ) | $ | (16,600 | ) | |||||
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Three Months Ended March 31, | Twelve Months Ended March 31, | |||||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
Net income | $ | 134,696 | $ | 111,795 | $ | 177,281 | $ | 180,215 | ||||||||||||||||||
Other comprehensive income, net of tax | ||||||||||||||||||||||||||
Defined benefit pension plans: | ||||||||||||||||||||||||||
Net actuarial gain (loss) | — | — | 3,099 | 44,974 | ||||||||||||||||||||||
Amortization of prior service cost | 33 | 33 | 133 | 580 | ||||||||||||||||||||||
Amortization of net actuarial loss | 253 | 6,616 | 20,098 | 32,036 | ||||||||||||||||||||||
Regulatory adjustment | (90) | (5,523) | (16,024) | (65,273) | ||||||||||||||||||||||
Net defined benefit pension plans | 196 | 1,126 | 7,306 | 12,317 | ||||||||||||||||||||||
Forward-starting interest rate swaps (“FSIRS”): | ||||||||||||||||||||||||||
Amounts reclassified into net income (loss) | — | 416 | — | 1,655 | ||||||||||||||||||||||
Net forward-starting interest rate swaps | — | 416 | — | 1,655 | ||||||||||||||||||||||
Total other comprehensive income, net of tax | 196 | 1,542 | 7,306 | 13,972 | ||||||||||||||||||||||
Comprehensive income | $ | 134,892 | $ | 113,337 | $ | 184,587 | $ | 194,187 |
10
10 |
SOUTHWEST GAS HOLDINGS, INC. | Form 10-Q | |||||||
SOUTHWEST GAS CORPORATION |
Three Months Ended March 31, | Twelve Months Ended March 31, | |||||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
CASH FLOW FROM OPERATING ACTIVITIES: | ||||||||||||||||||||||||||
Net income | $ | 134,696 | $ | 111,795 | $ | 177,281 | $ | 180,215 | ||||||||||||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||||||||||||||||||||
Depreciation and amortization | 74,650 | 72,114 | 265,579 | 256,814 | ||||||||||||||||||||||
Deferred income taxes | 39,194 | 34,560 | 47,021 | 72,845 | ||||||||||||||||||||||
Gain on sale of property | — | (1,503) | — | (1,503) | ||||||||||||||||||||||
Changes in undistributed stock compensation | 2,955 | 3,239 | 5,492 | 6,723 | ||||||||||||||||||||||
Equity AFUDC | — | (76) | 76 | 905 | ||||||||||||||||||||||
Changes in current assets and liabilities: | ||||||||||||||||||||||||||
Accounts receivable, net of allowance | (66,816) | (55,219) | (76,011) | (50,394) | ||||||||||||||||||||||
Accrued utility revenue | 31,200 | 32,900 | (4,900) | (1,500) | ||||||||||||||||||||||
Deferred purchased gas costs | (520,219) | (76,809) | (602,385) | (129,068) | ||||||||||||||||||||||
Accounts payable | (286,164) | (67,584) | 24,696 | 23,256 | ||||||||||||||||||||||
Accrued taxes | 34,473 | 30,835 | 25,392 | (3,263) | ||||||||||||||||||||||
Other current assets and liabilities | 351,252 | 90,558 | 71,957 | (20,731) | ||||||||||||||||||||||
Changes in deferred charges and other assets | (12,891) | (6,439) | (8,146) | (21,647) | ||||||||||||||||||||||
Changes in other liabilities and deferred credits | (10,942) | (4,033) | (34,599) | (27,637) | ||||||||||||||||||||||
Net cash provided by (used in) operating activities | (228,612) | 164,338 | (108,547) | 285,015 | ||||||||||||||||||||||
CASH FLOW FROM INVESTING ACTIVITIES: | ||||||||||||||||||||||||||
Construction expenditures and property additions | (192,097) | (141,123) | (734,105) | (614,562) | ||||||||||||||||||||||
Changes in customer advances | (6,608) | 7,693 | 7,205 | 19,381 | ||||||||||||||||||||||
Other | 119 | (918) | 7,954 | (829) | ||||||||||||||||||||||
Net cash used in investing activities | (198,586) | (134,348) | (718,946) | (596,010) | ||||||||||||||||||||||
CASH FLOW FROM FINANCING ACTIVITIES: | ||||||||||||||||||||||||||
Contributions from parent | — | — | — | 156,599 | ||||||||||||||||||||||
Dividends paid | (32,000) | (29,200) | (125,000) | (114,600) | ||||||||||||||||||||||
Issuance of long-term debt, net | 297,759 | 593,862 | 595,560 | 891,180 | ||||||||||||||||||||||
Retirement of long-term debt | — | (25,000) | (250,000) | (25,000) | ||||||||||||||||||||||
Change in credit facility and commercial paper | (50,000) | (130,000) | — | (150,000) | ||||||||||||||||||||||
Change in short-term debt | (225,000) | — | (250,000) | (17,000) | ||||||||||||||||||||||
Issuance of short-term debt | 450,000 | — | 450,000 | — | ||||||||||||||||||||||
Withholding remittance - share-based compensation | (1,292) | (1,978) | (1,883) | (1,999) | ||||||||||||||||||||||
Other | (993) | (489) | (3,961) | (2,104) | ||||||||||||||||||||||
Net cash provided by financing activities | 438,474 | 407,195 | 414,716 | 737,076 | ||||||||||||||||||||||
Change in cash and cash equivalents | 11,276 | 437,185 | (412,777) | 426,081 | ||||||||||||||||||||||
Cash and cash equivalents at beginning of period | 51,823 | 38,691 | 475,876 | 49,795 | ||||||||||||||||||||||
Cash and cash equivalents at end of period | $ | 63,099 | $ | 475,876 | $ | 63,099 | $ | 475,876 | ||||||||||||||||||
SUPPLEMENTAL INFORMATION: | ||||||||||||||||||||||||||
Interest paid, net of amounts capitalized | $ | 29,007 | $ | 15,757 | $ | 121,230 | $ | 99,045 | ||||||||||||||||||
Income taxes paid (received), net | $ | — | $ | — | $ | 5 | $ | (13,529) |
11 |
SOUTHWEST GAS HOLDINGS, INC. | Form 10-Q | |||||||
SOUTHWEST GAS CORPORATION | March 31, 2023 |
Three Months Ended March 31, | ||||||||||||||||||||
2023 | 2022 | |||||||||||||||||||
Common stock shares | ||||||||||||||||||||
Beginning and ending balances | 47,482 | 47,482 | ||||||||||||||||||
Common stock amount | ||||||||||||||||||||
Beginning and ending balances | $ | 49,112 | $ | 49,112 | ||||||||||||||||
Additional paid-in capital | ||||||||||||||||||||
Beginning balances | 1,622,969 | 1,618,911 | ||||||||||||||||||
Share-based compensation | 1,950 | 1,705 | ||||||||||||||||||
Ending balances | 1,624,919 | 1,620,616 | ||||||||||||||||||
Accumulated other comprehensive loss | ||||||||||||||||||||
Beginning balances | (38,261) | (46,913) | ||||||||||||||||||
Net actuarial gain arising during period, less amortization of unamortized benefit plan cost, net of tax | 196 | 1,126 | ||||||||||||||||||
FSIRS amounts reclassified to net income, net of tax | — | 416 | ||||||||||||||||||
Ending balances | (38,065) | (45,371) | ||||||||||||||||||
Retained earnings | ||||||||||||||||||||
Beginning balances | 935,355 | 906,827 | ||||||||||||||||||
Net income | 134,696 | 111,795 | ||||||||||||||||||
Share-based compensation | (287) | (445) | ||||||||||||||||||
Dividends declared to Southwest Gas Holdings, Inc. | (39,600) | (31,000) | ||||||||||||||||||
Ending balances | 1,030,164 | 987,177 | ||||||||||||||||||
Total Southwest Gas Corporation equity ending balances | $ | 2,666,130 | $ | 2,611,534 |
12 |
SOUTHWEST GAS HOLDINGS, INC. | Form 10-Q | |||||||
SOUTHWEST GAS CORPORATION | March 31, 2023 |
Significant Accounting Policies
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 date of the reorganization, existing shareholders of Southwest Gas Corporation became shareholders of Southwest Gas Holdings, Inc., on aone-for-one basis, with the same number of shares and same ownership percentage as they held immediately prior to the reorganization. At the same time, Southwest Gas Corporation and Centuri Construction Group, Inc. (“Centuri”Centuri,” or the “construction“utility infrastructure services” segment) each became subsidiaries, and until February 14, 2023, all of the shares of common stock of MountainWest Pipelines Holding Company (“MountainWest” or the “pipeline and storage” segment).
Southwest Gas Corporation (“Southwest”2023 or the “natural gas operations segment”)first quarter of 2024 and to be tax free to the Company and its stockholders for U.S. federal income tax purposes. See
months in colder climate areas, such as the northeastern and midwestern U.S. and in Canada. In warmer climate areas, such as the southwestern and southeastern U.S., utility infrastructure services activity continues year round.
No substantive change has occurred with regard to the Company’s business segments on the whole or induring the primary businesses comprising those segments as a resultrecently completed quarter, other than the sale of the foregoing organizational changes. Centuri operations continue to be part of continuing operations and included in the consolidated financial statements of Southwest Gas Holdings, Inc.
MountainWest, discussed above.
11
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
Prepaids
Other current liabilities. Other current liabilities of Southwest Gas Corporation include2022 was understated by approximately $21 million, of dividends declared but not yet paid to Southwest Gas Holdings, Inc. at September 30, 2017.
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 of three months or less. In general, cash and cash equivalents fall within Level 1 (quoted prices for identical financial instruments) of 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 also includes money market fund investments of approximately $19.8 million and $5.3 million, respectively, 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.
Significantnon-cash investing and financing activities included the following: Upon contract expiration, customer advances of approximately $1.9 million and $3.6 million, duringwas corrected in the first nine monthsquarter of 20172023.
Adoptionqualitatively, the impact of 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 to Employee Share-Based Payment Accounting.” The adoption of this update is considered a change in accounting principle. Among other things, the update clarifies that all cash payments made to taxing authoritiesthese items on the employees’ behalf for withheld shares should be presented as financing activities on the statement of cash flows. This change is required to be 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 of the Condensed Consolidated Statements of Cash Flows for both Southwest Gas Holdings, Inc. and Southwest Gas Corporation. The withheld taxes were included in the Other current assets and liabilities line item of the Condensed Consolidated Statements of Cash Flows in previous periods. Therefore, upon adoption, amounts presented as cash inflows from Other current assets 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 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 standalonepreviously issued financial statements, concluding they were not previously presented for natural gas operations, for reasons relatedmaterial to any prior period or 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.
12
13 |
SOUTHWEST GAS HOLDINGS, INC. | Form 10-Q | |||||||
SOUTHWEST GAS CORPORATION |
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.
Goodwill. Goodwill is assessed as of October each year for impairment (required annually by U.S. GAAP), or otherwise, if circumstances indicate impairment to the carrying value of goodwill may have occurred. In consideration of the holding company reorganization, management of the Company considered its reporting units and segments and determined that historic judgments regarding its segments and reporting units continue to apply, 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 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 | |||||||||
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September 30, 2017 | $ | 10,095 | $ | 137,770 | $ | 147,865 | ||||||
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Intercompany Transactions. Centuri recognizes revenues generated from contracts with Southwest (seeNote 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 | ||||
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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.
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 | ||||||
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Total | $ | 369,303 | $ | 342,343 | ||||
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13
Other Income (Deductions).The following table provides the composition of significant items included in Other income (deductions) in the condensed consolidated statements of 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 | ) | ||||||||||||
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Southwest Gas Corporation—total other income (deductions) | 3,081 | 2,521 | 8,744 | 6,712 | 10,308 | 9,615 | ||||||||||||||||||
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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 | ||||||||||||||||||
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Centuri—total other income (deductions) | (210 | ) | 44 | 38 | 44 | 1,187 | 1,246 | |||||||||||||||||
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Corporate and administrative | 5 | — | 6 | — | 6 | — | ||||||||||||||||||
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Consolidated Southwest Gas Holdings, Inc.—total other income (deductions) | $ | 2,876 | $ | 2,565 | $ | 8,788 | $ | 6,756 | $ | 11,501 | $ | 10,861 | ||||||||||||
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includes:
(Thousands of dollars) | March 31, 2023 | December 31, 2022 | |||||||||
Net cash surrender value of COLI policies | $ | 138,689 | $ | 136,245 | |||||||
Other property | 5,897 | 33,152 | |||||||||
Total Southwest Gas Corporation | 144,586 | 169,397 | |||||||||
Non-regulated property, equipment, and intangibles | 1,698,327 | 1,677,218 | |||||||||
Non-regulated accumulated provision for depreciation and amortization | (624,693) | (596,518) | |||||||||
Other property and investments | 32,107 | 31,075 | |||||||||
Total Southwest Gas Holdings, Inc. | $ | 1,250,327 | $ | 1,281,172 |
14 |
SOUTHWEST GAS HOLDINGS, INC. | Form 10-Q | |||||||
SOUTHWEST GAS CORPORATION | March 31, 2023 |
(Thousands of dollars) | Natural Gas Distribution | Utility Infrastructure Services | Total Company | |||||||||||||||||
December 31, 2022 | $ | 11,155 | $ | 776,095 | $ | 787,250 | ||||||||||||||
Foreign currency translation adjustment | — | 84 | 84 | |||||||||||||||||
March 31, 2023 | $ | 11,155 | $ | 776,179 | $ | 787,334 |
Three Months Ended March 31, | Twelve Months Ended March 31, | ||||||||||||||||||||||
(Thousands of dollars) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
Southwest Gas Corporation: | |||||||||||||||||||||||
Change in COLI policies | $ | 2,400 | $ | (2,000) | $ | (1,000) | $ | 4,100 | |||||||||||||||
Interest income | 12,471 | 2,801 | 25,853 | 7,198 | |||||||||||||||||||
Equity AFUDC | — | 76 | (76) | (905) | |||||||||||||||||||
Other components of net periodic benefit cost | 4,959 | (188) | 4,396 | (10,704) | |||||||||||||||||||
Miscellaneous income and (expense) | (1,387) | 626 | (18,929) | (3,483) | |||||||||||||||||||
Southwest Gas Corporation - total other income (deductions) | 18,443 | 1,315 | 10,244 | (3,794) | |||||||||||||||||||
Centuri, MountainWest, and Southwest Gas Holdings, Inc.: | |||||||||||||||||||||||
Foreign transaction gain (loss) | (690) | 3 | 284 | (16) | |||||||||||||||||||
Equity AFUDC | 82 | 182 | 365 | 182 | |||||||||||||||||||
Equity in earnings of unconsolidated investments | 360 | 515 | 2,474 | 749 | |||||||||||||||||||
Miscellaneous income and (expense) | (5) | (651) | (2,467) | 303 | |||||||||||||||||||
Corporate and administrative | 270 | (120) | 127 | (127) | |||||||||||||||||||
Southwest Gas Holdings, Inc. - total other income (deductions) | $ | 18,460 | $ | 1,244 | $ | 11,027 | $ | (2,703) |
Recently Issued Accounting Standards Updates. Interest income primarily relates to Southwest’s regulatory asset balances, including its deferred purchased gas cost mechanisms. Interest income includes carrying charges on regulatory account balances, including deferred purchased gas cost balances, which increased from $368 million as of March 31, 2022 to $970 million as of March 31, 2023. Refer also to
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)
14
15 |
SOUTHWEST GAS HOLDINGS, INC. | Form 10-Q | |||||||
SOUTHWEST GAS CORPORATION |
represent genuine and valid contracts for which revenue is able
(Thousands of dollars): | Linetec | Drum | Total | |||||||||||||||||
Balance, December 31, 2022 | $ | 146,765 | $ | 12,584 | $ | 159,349 | ||||||||||||||
Net income attributable to redeemable noncontrolling interests | 1,683 | 56 | 1,739 | |||||||||||||||||
Redemption value adjustments | 5,832 | — | 5,832 | |||||||||||||||||
Redemption of equity interest from noncontrolling party | (39,894) | — | (39,894) | |||||||||||||||||
Balance, March 31, 2023 | $ | 114,386 | $ | 12,640 | $ | 127,026 |
Three Months Ended March 31, | Twelve Months Ended March 31, | |||||||||||||||||||||||||
(In thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
Weighted average basic shares | 68,265 | 60,737 | 67,413 | 59,919 | ||||||||||||||||||||||
Effect of dilutive securities: | ||||||||||||||||||||||||||
Restricted stock units (1)(2) | 154 | 117 | — | 125 | ||||||||||||||||||||||
Weighted average diluted shares | 68,419 | 60,854 | 67,413 | 60,044 |
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 havepotential impact on the Company’s (and Southwest’s in the case of utility operations)their 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.
In February 2016, the FASB issued the update “Leases (Topic 842).” Under the update, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date:
A lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and
Aright-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.
Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with 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 existoff-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 beginning 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
15
16 |
SOUTHWEST GAS HOLDINGS, INC. | Form 10-Q | |||||||
SOUTHWEST GAS CORPORATION |
reference rate reform. In June 2016,December 2022, the FASB issued ASU 2022-06 “Reference Rate Reform (Topic 848): Deferral of the update “Financial Instruments—Credit Losses (Topic 326): MeasurementSunset Date of Credit Losses on Financial Instruments.Topic 848.” The update amends guidance on reporting credit losses for financial assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, the update eliminates the “probable” threshold for initial recognition of credit losses in current U.S. GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basisprovides deferral of the financial assetsunset date of Topic 848 from December 31, 2022 to presentDecember 31, 2024. Management will continue to monitor 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 periods within those fiscal years. Management is evaluating what impact, if any,impacts this update might have on itsthe Company’s and Southwest’s consolidated financial statements and disclosures.
In August 2016,disclosures, and will reflect such appropriately, in the FASBevent that the optional guidance is elected. See also LIBOR discussion in
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 thepre-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 or material to Southwest or the Company effective 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—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” The update eliminates Step 2 from the goodwill impairment test. The annual,2023 or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s
16
17 | ||||||||
fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from anytax-deductible goodwill on the carrying amount of the reporting unit should be considered when measuring 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. 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 this update would have had no impact on the consolidated financial statements for the periods presented if it had been effective during those periods.
In March 2017, the FASB issued the update “Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” The update applies to all employers that offer employee benefits under defined benefit pension plans, other postretirement benefit plans, or other types of benefits accounted for under Topic 715, Compensation – Retirement Benefits. The update requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, and be appropriately described. The update also allows only the service cost component (and not the other components of periodic benefit costs) to be eligible for capitalization 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. It is anticipated that Southwest would continue to request recovery of the total costs of defined benefit plans in rate applications filed with its various regulatory bodies. Rate-regulated entities providing utility and transmission services have historically capitalized a portion of periodic benefit costs (includingnon-service cost components) in utility infrastructure (for instance, when productive labor is also charged to capital work orders). The portion capitalized has historically been a component of depreciation 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, 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 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 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.
17
SOUTHWEST GAS HOLDINGS, INC. | Form 10-Q | |||||||
SOUTHWEST GAS CORPORATION |
Net
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 | ||||||||||||||||||
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Net periodic benefit cost | $ | 9,570 | $ | 9,392 | $ | 28,711 | $ | 28,176 | $ | 38,103 | $ | 39,248 | ||||||||||||
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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 | ||||||||||||||||||
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Net periodic benefit cost | $ | 909 | $ | 893 | $ | 2,726 | $ | 2,680 | $ | 3,619 | $ | 3,507 | ||||||||||||
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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 | ||||||||||||||||||
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Net periodic benefit cost | $ | 669 | $ | 820 | $ | 2,008 | $ | 2,461 | $ | 2,829 | $ | 3,175 | ||||||||||||
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18
Note 3 – Segment Information
The Company has two reportable segments: natural gas operations and construction services. Southwest has a single reportable segment that is referred to herein as the natural gas operations segmentother components of the Company. In order to reconcile to net periodic benefit cost are reflected in Other income as disclosed in(deductions) on the Condensed Consolidated Statements of Income an Other columnof each entity. Variability in total net periodic benefit cost between periods, especially with regard to the Qualified Retirement Plan, is included associated with impacts relatedsubject to corporate and administrative activities related to Southwest Gas Holdings, Inc. The following tables present revenues from external customers, intersegment revenues, and segment net income forchanges in underlying actuarial assumptions between periods, notably the two reportable segments (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 | ||||||||||||
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Total | $ | 213,059 | $ | 380,094 | $ | — | $ | 593,153 | ||||||||
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Segment net income (loss) | $ | (4,024 | ) | $ | 14,335 | $ | (107 | ) | $ | 10,204 | ||||||
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Three months ended September 30, 2016 | ||||||||||||||||
Revenues from external customers | $ | 200,179 | $ | 312,531 | $ | — | $ | 512,710 | ||||||||
Intersegment revenues | — | 27,259 | — | 27,259 | ||||||||||||
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Total | $ | 200,179 | $ | 339,790 | $ | — | $ | 539,969 | ||||||||
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Segment net income (loss) | $ | (12,405 | ) | $ | 14,877 | $ | — | $ | 2,472 | |||||||
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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 | ||||||||||||
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Total | $ | 935,823 | $ | 872,536 | $ | — | $ | 1,808,359 | ||||||||
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Segment net income (loss) | $ | 82,436 | $ | 15,717 | $ | (777 | ) | $ | 97,376 | |||||||
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Nine months ended September 30, 2016 | ||||||||||||||||
Revenues from external customers | $ | 980,927 | $ | 762,835 | $ | — | $ | 1,743,762 | ||||||||
Intersegment revenues | — | 75,203 | — | 75,203 | ||||||||||||
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Total | $ | 980,927 | $ | 838,038 | $ | — | $ | 1,818,965 | ||||||||
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Segment net income | $ | 67,536 | $ | 19,325 | $ | — | $ | 86,861 | ||||||||
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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 | ||||||||||||
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|
|
|
|
|
|
| |||||||||
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 | ||||||||
|
|
|
|
|
|
|
|
Note 4 – 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.
19
Qualified Retirement Plan | |||||||||||||||||||||||
March 31, | |||||||||||||||||||||||
Three Months | Twelve Months | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
(Thousands of dollars) | |||||||||||||||||||||||
Service cost | $ | 6,460 | $ | 11,028 | $ | 39,542 | $ | 41,897 | |||||||||||||||
Interest cost | 14,791 | 11,251 | 48,546 | 41,575 | |||||||||||||||||||
Expected return on plan assets | (21,015) | (19,978) | (80,950) | (74,242) | |||||||||||||||||||
Amortization of net actuarial loss | 84 | 8,117 | 24,435 | 39,583 | |||||||||||||||||||
Net periodic benefit cost | $ | 320 | $ | 10,418 | $ | 31,573 | $ | 48,813 | |||||||||||||||
SERP | |||||||||||||||||||||||
March 31, | |||||||||||||||||||||||
Three Months | Twelve Months | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
(Thousands of dollars) | |||||||||||||||||||||||
Service cost | $ | 62 | $ | 106 | $ | 380 | $ | 501 | |||||||||||||||
Interest cost | 531 | 360 | 1,612 | 1,433 | |||||||||||||||||||
Amortization of net actuarial loss | 249 | 588 | 2,011 | 2,570 | |||||||||||||||||||
Net periodic benefit cost | $ | 842 | $ | 1,054 | $ | 4,003 | $ | 4,504 | |||||||||||||||
PBOP | |||||||||||||||||||||||
March 31, | |||||||||||||||||||||||
Three Months | Twelve Months | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
(Thousands of dollars) | |||||||||||||||||||||||
Service cost | $ | 317 | $ | 485 | $ | 1,773 | $ | 1,753 | |||||||||||||||
Interest cost | 825 | 613 | 2,664 | 2,258 | |||||||||||||||||||
Expected return on plan assets | (606) | (807) | (3,027) | (3,236) | |||||||||||||||||||
Amortization of prior service costs | 44 | 44 | 175 | 763 | |||||||||||||||||||
Net periodic benefit cost | $ | 580 | $ | 335 | $ | 1,585 | $ | 1,538 |
18 |
SOUTHWEST GAS HOLDINGS, INC. | Form 10-Q | |||||||
SOUTHWEST GAS CORPORATION |
The fixed-price contracts and Swaps are utilizedfollowing information about the Company’s revenues is presented by segment. Southwest under its volatility mitigation programs to effectively fixencompasses the price on a portion (up to 25% in the Arizona and California jurisdictions) of its natural gas supply portfolios. The maturities ofdistribution segment. Centuri encompasses the Swaps highly correlate to forecasted purchases of natural gas, during time frames ranging from October 2017 through March 2019. Under such contracts, Southwest paysutility infrastructure services segment. MountainWest, commencing January 2022 (following its acquisition) and until its sale in mid-February 2023, encompassed the counterparty a fixed ratepipeline 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 basedstorage segment.
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.
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 and 2016 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 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
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 (thousandsinclude revenue from contracts with customers, which is shown below, disaggregated by customer type, in addition to other categories of dollars):
Fair valuesrevenue:
Three Months Ended March 31, | Twelve Months Ended March 31, | ||||||||||||||||||||||
(Thousands of dollars) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
Residential | $ | 739,313 | $ | 514,586 | $ | 1,549,521 | $ | 1,147,055 | |||||||||||||||
Small commercial | 174,184 | 123,984 | 428,720 | 312,800 | |||||||||||||||||||
Large commercial | 31,091 | 20,161 | 96,164 | 64,859 | |||||||||||||||||||
Industrial/other | 21,114 | 9,972 | 62,036 | 38,515 | |||||||||||||||||||
Transportation | 30,543 | 26,632 | 104,553 | 94,336 | |||||||||||||||||||
Revenue from contracts with customers | 996,245 | 695,335 | 2,240,994 | 1,657,565 | |||||||||||||||||||
Alternative revenue program revenues (deferrals) | (86,204) | (23,499) | (81,183) | 6,055 | |||||||||||||||||||
Other revenues (1) | 4,838 | 4,703 | 13,598 | 12,777 | |||||||||||||||||||
Total Regulated operations revenues | $ | 914,879 | $ | 676,539 | $ | 2,173,409 | $ | 1,676,397 |
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 | |||||||
|
|
|
|
|
|
20
Three Months Ended March 31, | Twelve Months Ended March 31, | ||||||||||||||||||||||
(Thousands of dollars) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
Service Types: | |||||||||||||||||||||||
Gas infrastructure services | $ | 297,408 | $ | 260,682 | $ | 1,568,544 | $ | 1,341,185 | |||||||||||||||
Electric power infrastructure services | 233,640 | 181,968 | 829,796 | 613,209 | |||||||||||||||||||
Other | 122,245 | 81,227 | 491,403 | 364,169 | |||||||||||||||||||
Total Utility infrastructure services revenues | $ | 653,293 | $ | 523,877 | $ | 2,889,743 | $ | 2,318,563 |
Three Months Ended March 31, | Twelve Months Ended March 31, | ||||||||||||||||||||||
(Thousands of dollars) | 2023 | 2022 * | 2023 | 2022* | |||||||||||||||||||
Contract Types: | |||||||||||||||||||||||
Master services agreement | $ | 547,606 | $ | 445,345 | $ | 2,444,481 | $ | 1,804,643 | |||||||||||||||
Bid contract | 105,687 | 78,532 | 445,262 | 513,920 | |||||||||||||||||||
Total Utility infrastructure services revenues | $ | 653,293 | $ | 523,877 | $ | 2,889,743 | $ | 2,318,563 | |||||||||||||||
Unit price contracts | $ | 328,527 | $ | 302,523 | $ | 1,634,135 | $ | 1,437,156 | |||||||||||||||
Fixed price contracts | 166,915 | 86,537 | 578,417 | 319,685 | |||||||||||||||||||
Time and materials contracts | 157,851 | 134,817 | 677,191 | 561,722 | |||||||||||||||||||
Total Utility infrastructure services revenues | $ | 653,293 | $ | 523,877 | $ | 2,889,743 | $ | 2,318,563 |
19 | ||||||||
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 gas adjustment (“PGA”) mechanism in determining its 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 | ||||||
|
|
|
|
|
|
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. The estimated fair values of Southwest’s Swaps were determined at September 30, 2017 and December 31, 2016 using New York Mercantile Exchange (“NYMEX”) futures settlement prices for delivery of natural gas at Henry Hub adjusted by the price of NYMEX ClearPort basis Swaps, 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.
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:
21
SOUTHWEST GAS HOLDINGS, INC. | Form 10-Q | |||||||
SOUTHWEST GAS CORPORATION |
Level 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 | |||
|
|
|
|
No
(Thousands of dollars) | March 31, 2023 | December 31, 2022 | |||||||||
Contracts receivable, net | $ | 322,558 | $ | 394,022 | |||||||
Revenue earned on contracts in progress in excess of billings | 279,624 | 238,059 | |||||||||
Amounts billed in excess of revenue earned on contracts | 39,595 | 35,769 |
With regardshort duration of these contracts, Centuri has not disclosed the transaction price for the remaining performance obligations as of the end of each reporting period or when the Company expects to recognize the revenue.
(Thousands of dollars) | March 31, 2023 | December 31, 2022 | |||||||||
Billed on completed contracts and contracts in progress | $ | 325,528 | $ | 395,771 | |||||||
Other receivables | 1,738 | 2,569 | |||||||||
Contracts receivable, gross | 327,266 | 398,340 | |||||||||
Allowance for doubtful accounts | (4,708) | (4,318) | |||||||||
Contracts receivable, net | $ | 322,558 | $ | 394,022 |
Three Months Ended March 31, | |||||||||||
(Thousands of dollars) | 2023 | 2022 | |||||||||
Regulated gas transportation and storage revenues | $ | 34,225 | $ | 61,977 | |||||||
NGL revenues | 441 | 1,493 | |||||||||
Other revenues | 466 | 3,479 | |||||||||
Revenue from contracts with customers | 35,132 | 66,949 | |||||||||
Other revenues | — | 44 | |||||||||
Total Regulated operations revenues | $ | 35,132 | $ | 66,993 |
20 |
SOUTHWEST GAS HOLDINGS, INC. | Form 10-Q | |||||||
SOUTHWEST GAS CORPORATION | March 31, 2023 |
Note 54 – Common Stock
In January 2017,
Gross proceeds | $ | 158,180,343 | |||||||||
Less: agent commissions | (1,581,803) | ||||||||||
Net proceeds | $ | 156,598,540 | |||||||||
Number of shares sold | 2,302,407 | ||||||||||
Weighted average price per share | $ | 68.70 |
general corporate purposes.
Note 6 – Long-Term Debt
Carrying amounts
22
21 | ||||||||
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 | ||||||||||||
|
|
|
|
23
SOUTHWEST GAS HOLDINGS, INC. | Form 10-Q | |||||||
SOUTHWEST GAS CORPORATION |
In March 2017,
March 31, 2023 | December 31, 2022 | |||||||||||||||||||||||||
Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||||||||||||
(Thousands of dollars) | ||||||||||||||||||||||||||
Southwest Gas Corporation: | ||||||||||||||||||||||||||
Debentures: | ||||||||||||||||||||||||||
Notes, 6.1%, due 2041 | $ | 125,000 | $ | 125,376 | $ | 125,000 | $ | 113,184 | ||||||||||||||||||
Notes, 4.05%, due 2032 | 600,000 | 552,972 | 600,000 | 527,052 | ||||||||||||||||||||||
Notes, 4.875%, due 2043 | 250,000 | 210,990 | 250,000 | 195,703 | ||||||||||||||||||||||
Notes, 3.8%, due 2046 | 300,000 | 229,644 | 300,000 | 209,169 | ||||||||||||||||||||||
Notes, 3.7%, due 2028 | 300,000 | 282,960 | 300,000 | 275,043 | ||||||||||||||||||||||
Notes, 5.45%, due 2028 | 300,000 | 303,159 | — | — | ||||||||||||||||||||||
Notes, 4.15%, due 2049 | 300,000 | 238,821 | 300,000 | 218,712 | ||||||||||||||||||||||
Notes, 2.2%, due 2030 | 450,000 | 372,380 | 450,000 | 353,763 | ||||||||||||||||||||||
Notes, 3.18%, due 2051 | 300,000 | 198,390 | 300,000 | 185,523 | ||||||||||||||||||||||
Notes, 5.8%, due 2027 | 300,000 | 310,653 | 300,000 | 305,913 | ||||||||||||||||||||||
8% Series, due 2026 | 75,000 | 80,121 | 75,000 | 80,027 | ||||||||||||||||||||||
Medium-term notes, 7.92% series, due 2027 | 25,000 | 27,069 | 25,000 | 26,840 | ||||||||||||||||||||||
Medium-term notes, 6.76% series, due 2027 | 7,500 | 7,803 | 7,500 | 7,662 | ||||||||||||||||||||||
Unamortized discount and debt issuance costs | (32,893) | (29,471) | ||||||||||||||||||||||||
3,299,607 | 3,003,029 | |||||||||||||||||||||||||
Revolving credit facility and commercial paper | — | — | 50,000 | 50,000 | ||||||||||||||||||||||
Industrial development revenue 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 | (1,630) | (1,733) | ||||||||||||||||||||||||
198,370 | 198,267 | |||||||||||||||||||||||||
Less: current maturities | — | — | ||||||||||||||||||||||||
Southwest Gas Corporation total long-term debt, less current maturities | $ | 3,497,977 | $ | 3,251,296 | ||||||||||||||||||||||
Southwest Gas Holdings, Inc.: | ||||||||||||||||||||||||||
Centuri secured term loan facility | $ | 1,002,825 | $ | 997,832 | $ | 1,008,550 | $ | 995,852 | ||||||||||||||||||
Centuri secured revolving credit facility | 19,212 | 19,297 | 81,955 | 82,315 | ||||||||||||||||||||||
Other debt obligations | 119,362 | 112,863 | 126,844 | 118,314 | ||||||||||||||||||||||
Unamortized discount and debt issuance costs | (19,869) | (20,789) | ||||||||||||||||||||||||
Less: current maturities | (41,907) | (44,557) | ||||||||||||||||||||||||
Southwest Gas Holdings, Inc. total long-term debt, less current maturities | $ | 4,577,600 | $ | 4,403,299 |
22 |
SOUTHWEST GAS HOLDINGS, INC. | Form 10-Q | |||||||
SOUTHWEST GAS CORPORATION | March 31, 2023 |
At September 30, 2017, the facility.
Note 7 – Short-Term Debt
In March 2017, Southwest Gas Holdings, Inc. entered into a credit facility with a borrowing capacity of $100 million that expires in March 2022. The Company intends to utilize this facilityprimarily used for short-term financing needs. Interest rates for thisthe credit facility are calculated at either the LIBORSOFR or the “alternate base rate,” plus in each case an applicable margin that is determined basedmargin. There was
23 |
SOUTHWEST GAS HOLDINGS, INC. | Form 10-Q | |||||||
SOUTHWEST GAS CORPORATION | March 31, 2023 |
As discussed inMarch 31, 2023.
24
Note 8 – Equity, Other Comprehensive Income and Accumulated Other Comprehensive Income
The table below provides details of activity in equity and the redeemable noncontrolling interest for Southwest Gas Holdings, Inc. on 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 | ) | ||||||||||||||||||||||||||||
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SEPTEMBER 30, 2017 | 47,732 | $ | 49,362 | $ | 924,213 | $ | (42,818 | ) | $ | 784,934 | $ | (2,295 | ) | $ | 1,713,396 | $ | — | |||||||||||||||
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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 a subsidiary of Southwest Gas Holdings, Inc., and only equity shares of the latter are publicly traded, under 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 | ||||||||||||||||||||||
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SEPTEMBER 30, 2017 | 47,482 | $ | 49,112 | $ | 917,581 | $ | (42,299 | ) | $ | 606,007 | $ | 1,530,401 | ||||||||||||
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25
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Condensed Consolidated Statements of Equity.
(Thousands
Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | |||||||||||||||||||||||||||||||||||||
(Thousands of dollars) | 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 | $ | 44 | $ | (11) | $ | 33 | $ | 44 | $ | (11) | $ | 33 | ||||||||||||||||||||||||||
Amortization of net actuarial (gain)/loss | 333 | (80) | 253 | 8,705 | (2,089) | 6,616 | ||||||||||||||||||||||||||||||||
Regulatory adjustment | (119) | 29 | (90) | (7,268) | 1,745 | (5,523) | ||||||||||||||||||||||||||||||||
Pension plans other comprehensive income (loss) | 258 | (62) | 196 | 1,481 | (355) | 1,126 | ||||||||||||||||||||||||||||||||
FSIRS (designated hedging activities): | ||||||||||||||||||||||||||||||||||||||
Amounts reclassified into net income | — | — | — | 545 | (129) | 416 | ||||||||||||||||||||||||||||||||
FSIRS other comprehensive income (loss) | — | — | — | 545 | (129) | 416 | ||||||||||||||||||||||||||||||||
Total other comprehensive income (loss) - Southwest Gas Corporation | 258 | (62) | 196 | 2,026 | (484) | 1,542 | ||||||||||||||||||||||||||||||||
Foreign currency translation adjustments: | ||||||||||||||||||||||||||||||||||||||
Translation adjustments | 97 | — | 97 | 1,247 | — | 1,247 | ||||||||||||||||||||||||||||||||
Foreign currency other comprehensive income (loss) | 97 | — | 97 | 1,247 | — | 1,247 | ||||||||||||||||||||||||||||||||
Total other comprehensive income (loss) - Southwest Gas Holdings, Inc. | $ | 355 | $ | (62) | $ | 293 | $ | 3,273 | $ | (484) | $ | 2,789 |
Twelve Months Ended March 31, 2023 | Twelve Months Ended March 31, 2022 | |||||||||||||||||||||||||||||||||||||
(Thousands of dollars) | 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) | $ | 4,079 | $ | (980) | $ | 3,099 | $ | 59,176 | $ | (14,202) | $ | 44,974 | ||||||||||||||||||||||||||
Amortization of prior service cost | 175 | (42) | 133 | 763 | (183) | 580 | ||||||||||||||||||||||||||||||||
Amortization of net actuarial (gain)/loss | 26,446 | (6,348) | 20,098 | 42,153 | (10,117) | 32,036 | ||||||||||||||||||||||||||||||||
Regulatory adjustment | (21,083) | 5,059 | (16,024) | (85,887) | 20,614 | (65,273) | ||||||||||||||||||||||||||||||||
Pension plans other comprehensive income (loss) | 9,617 | (2,311) | 7,306 | 16,205 | (3,888) | 12,317 | ||||||||||||||||||||||||||||||||
FSIRS (designated hedging activities): | ||||||||||||||||||||||||||||||||||||||
Amounts reclassified into net income | — | — | — | 2,175 | (520) | 1,655 | ||||||||||||||||||||||||||||||||
FSIRS other comprehensive income (loss) | — | — | — | 2,175 | (520) | 1,655 | ||||||||||||||||||||||||||||||||
Total other comprehensive income (loss) - Southwest Gas Corporation | 9,617 | (2,311) | 7,306 | 18,380 | (4,408) | 13,972 | ||||||||||||||||||||||||||||||||
Foreign currency translation adjustments: | ||||||||||||||||||||||||||||||||||||||
Translation adjustments | (7,283) | — | (7,283) | 444 | — | 444 | ||||||||||||||||||||||||||||||||
Foreign currency other comprehensive income (loss) | (7,283) | — | (7,283) | 444 | — | 444 | ||||||||||||||||||||||||||||||||
Total other comprehensive income (loss) - Southwest Gas Holdings, Inc. | $ | 2,334 | $ | (2,311) | $ | 23 | $ | 18,824 | $ | (4,408) | $ | 14,416 |
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 | ) | ||||||||||||||
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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 | ||||||||||||||||
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FSIRS other comprehensive income | 835 | (317 | ) | 518 | 835 | (317 | ) | 518 | ||||||||||||||||
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Total other comprehensive income (loss) - Southwest Gas Corporation | 1,796 | (682 | ) | 1,114 | 1,813 | (688 | ) | 1,125 | ||||||||||||||||
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Foreign currency translation adjustments: | ||||||||||||||||||||||||
Translation adjustments | 1,012 | — | 1,012 | (238 | ) | — | (238 | ) | ||||||||||||||||
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Foreign currency other comprehensive income (loss) | 1,012 | — | 1,012 | (238 | ) | — | (238 | ) | ||||||||||||||||
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Total other comprehensive income (loss) - Southwest Gas Holdings, Inc. | $ | 2,808 | $ | (682 | ) | $ | 2,126 | $ | 1,575 | $ | (688 | ) | $ | 887 | ||||||||||
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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 | ) | ||||||||||||||
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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 | ||||||||||||||||
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FSIRS other comprehensive income | 2,507 | (953 | ) | 1,554 | 2,508 | (952 | ) | 1,556 | ||||||||||||||||
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Total other comprehensive income (loss)—Southwest Gas Corporation | 5,388 | (2,048 | ) | 3,340 | 5,441 | (2,066 | ) | 3,375 | ||||||||||||||||
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Foreign currency translation adjustments: | ||||||||||||||||||||||||
Translation adjustments | 1,861 | — | 1,861 | 614 | — | 614 | ||||||||||||||||||
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Foreign currency other comprehensive income (loss) | 1,861 | — | 1,861 | 614 | — | 614 | ||||||||||||||||||
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Total other comprehensive income (loss) | $ | 7,249 | $ | (2,048 | ) | $ | 5,201 | $ | 6,055 | $ | (2,066 | ) | $ | 3,989 | ||||||||||
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26
24 |
SOUTHWEST GAS HOLDINGS, INC. | Form 10-Q | |||||||
SOUTHWEST GAS CORPORATION |
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 | ) | ||||||||||||||
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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 | ||||||||||||||||
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FSIRS other comprehensive income (loss) | 3,344 | (1,271 | ) | 2,073 | 3,344 | (1,271 | ) | 2,073 | ||||||||||||||||
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Total other comprehensive income (loss)—Southwest Gas Corporation | 3,339 | (1,270 | ) | 2,069 | 2,402 | (912 | ) | 1,490 | ||||||||||||||||
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Foreign currency translation adjustments: | ||||||||||||||||||||||||
Translation adjustments | 1,408 | — | 1,408 | 233 | — | 233 | ||||||||||||||||||
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Foreign currency other comprehensive income (loss) | 1,408 | — | 1,408 | 233 | — | 233 | ||||||||||||||||||
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Total other comprehensive income (loss)—Southwest Gas Holdings, Inc. | $ | 4,747 | $ | (1,270 | ) | $ | 3,477 | $ | 2,635 | $ | (912 | ) | $ | 1,723 | ||||||||||
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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.
AOCI—Rollforward
(ThousandsSheets and its Condensed Consolidated Statements 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 | ) | |||||||||||||
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Translation adjustments | — | — | — | — | — | — | 1,861 | — | 1,861 | 1,861 | ||||||||||||||||||||||||||||||
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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 | ) | |||||||||||||||||||||||||||
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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 | ||||||||||||||||||||||||||||||
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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 | ||||||||||||||||||||||||||||
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Ending Balance AOCI September 30, 2017 | $ | (54,732 | ) | $ | 20,798 | $ | (33,934 | ) | $ | (13,492 | ) | $ | 5,127 | $ | (8,365 | ) | $ | (519 | ) | $ | — | $ | (519 | ) | $ | (42,818 | ) | |||||||||||||
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27
Equity:
Defined Benefit Plans | Foreign Currency Items | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Thousands of dollars) | Before-Tax | Tax (Expense) Benefit (3) | After-Tax | Before-Tax | Tax (Expense) Benefit | After-Tax | AOCI | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning Balance AOCI December 31, 2022 | $ | (50,342) | $ | 12,081 | $ | (38,261) | $ | (5,981) | $ | — | $ | (5,981) | $ | (44,242) | ||||||||||||||||||||||||||||||||||||||||||||||||
Translation adjustments | — | — | — | 97 | — | 97 | 97 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) before reclassifications | — | — | — | 97 | — | 97 | 97 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of prior service cost (1) | 44 | (11) | 33 | — | — | — | 33 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of net actuarial loss (1) | 333 | (80) | 253 | — | — | — | 253 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Regulatory adjustment (2) | (119) | 29 | (90) | — | — | — | (90) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net current period other comprehensive income (loss) attributable to Southwest Gas Holdings, Inc. | 258 | (62) | 196 | 97 | — | 97 | 293 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ending Balance AOCI March 31, 2023 | $ | (50,084) | $ | 12,019 | $ | (38,065) | $ | (5,884) | $ | — | $ | (5,884) | $ | (43,949) |
AOCI—Rollforward
(Thousands
Defined Benefit Plans | ||||||||||||||||||||
(Thousands of dollars) | Before-Tax | Tax (Expense) Benefit (6) | After-Tax | |||||||||||||||||
Beginning Balance AOCI December 31, 2022 | $ | (50,342) | $ | 12,081 | $ | (38,261) | ||||||||||||||
Amortization of prior service cost (4) | 44 | (11) | 33 | |||||||||||||||||
Amortization of net actuarial loss (4) | 333 | (80) | 253 | |||||||||||||||||
Regulatory adjustment (5) | (119) | 29 | (90) | |||||||||||||||||
Net current period other comprehensive income attributable to Southwest Gas Corporation | 258 | (62) | 196 | |||||||||||||||||
Ending Balance AOCI March 31, 2023 | $ | (50,084) | $ | 12,019 | $ | (38,065) |
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 | ) | |||||||||
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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 | ) | ||||||||||||||||||
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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 | |||||||||||||||||||
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Ending Balance AOCI September 30, 2017 | $ | (54,732 | ) | $ | 20,798 | $ | (33,934 | ) | $ | (13,492 | ) | $ | 5,127 | $ | (8,365 | ) | $ | (42,299 | ) | |||||||||
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net periodic benefit cost (see
Note 2 – Components of Net Periodic Benefit Cost for additional details).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 | ||||||
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Recognized in AOCI | $ | (54,732 | ) | $ | (57,613 | ) | ||
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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 a 3.4% equity interest in Centuri, which, subject to an eligibility timeline, 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.
28
(Thousands of dollars) | March 31, 2023 | December 31, 2022 | ||||||||||||
Net actuarial loss | $ | (359,780) | $ | (360,113) | ||||||||||
Prior service cost | (1,309) | (1,353) | ||||||||||||
Less: amount recognized in regulatory assets | 311,005 | 311,124 | ||||||||||||
Recognized in AOCI | $ | (50,084) | $ | (50,342) |
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 | ) | ||
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Balance, September 30, 2017 | $ | — | ||
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Note 10 – Reorganization Impacts – Discontinued Operations Solely Related to Southwest Gas Corporation
No substantive change has occurred with regard to the Company’s business segments on the whole, or in the primary businesses comprising those segments (Centuri operations continue to be part of continuing operations 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 of the holding company reorganization effective January 2017, Centuri is no longer a subsidiary of Southwest; whereas historically, Centuri had been a direct subsidiary of Southwest. To give effect to this change, the condensed consolidated financial statements related to Southwest Gas Corporation, which are separately included in thisForm 10-Q, depict Centuri-related amounts as discontinued operations for periods prior to January 2017.
Due to the discontinued operations accounting reflection, the following disclosures provide 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.
The following table presents the major categories of assets and liabilities within the amounts reported as discontinued operations – construction services in the Condensed Consolidated Balance Sheet of Southwest Gas Corporation:
25 |
(Thousands of dollars) | March 31, 2023 | December 31, 2022 | |||||||||
Centuri accounts receivable for services provided to Southwest | $ | 14,966 | $ | 18,067 |
(Thousands of dollars) | Natural Gas Distribution | Utility Infrastructure Services | Pipeline and Storage | Other | Total | ||||||||||||||||||||||||
Three Months Ended March 31, 2023 | |||||||||||||||||||||||||||||
Revenues from external customers | $ | 914,879 | $ | 624,489 | $ | 35,132 | $ | — | $ | 1,574,500 | |||||||||||||||||||
Intersegment revenues | — | 28,804 | — | — | 28,804 | ||||||||||||||||||||||||
Total | $ | 914,879 | $ | 653,293 | $ | 35,132 | $ | — | $ | 1,603,304 | |||||||||||||||||||
Segment net income (loss) | $ | 134,696 | $ | (11,872) | $ | (16,288) | $ | (60,625) | $ | 45,911 | |||||||||||||||||||
Three Months Ended March 31, 2022 | |||||||||||||||||||||||||||||
Revenues from external customers | $ | 676,539 | $ | 495,544 | $ | 66,993 | $ | — | $ | 1,239,076 | |||||||||||||||||||
Intersegment revenues | — | 28,333 | — | — | 28,333 | ||||||||||||||||||||||||
Total | $ | 676,539 | $ | 523,877 | $ | 66,993 | $ | — | $ | 1,267,409 | |||||||||||||||||||
Segment net income (loss) | $ | 111,795 | $ | (23,486) | $ | 16,930 | $ | (9,061) | $ | 96,178 | |||||||||||||||||||
(Thousands of dollars) | Natural Gas Distribution | Utility Infrastructure Services | Pipeline and Storage | Other | Total | ||||||||||||||||||||||||
Twelve Months Ended March 31, 2023 | |||||||||||||||||||||||||||||
Revenues from external customers | $ | 2,173,409 | $ | 2,754,614 | $ | 232,752 | $ | — | $ | 5,160,775 | |||||||||||||||||||
Intersegment revenues | — | 135,129 | — | — | 135,129 | ||||||||||||||||||||||||
Total | $ | 2,173,409 | $ | 2,889,743 | $ | 232,752 | $ | — | $ | 5,295,904 | |||||||||||||||||||
Segment net income (loss) | $ | 177,281 | $ | 13,679 | $ | (316,951) | $ | (127,566) | $ | (253,557) | |||||||||||||||||||
Twelve Months Ended March 31, 2022 | |||||||||||||||||||||||||||||
Revenues from external customers | $ | 1,676,397 | $ | 2,212,087 | $ | 66,993 | $ | — | $ | 3,955,477 | |||||||||||||||||||
Intersegment revenues | — | 106,476 | — | — | 106,476 | ||||||||||||||||||||||||
Total | $ | 1,676,397 | $ | 2,318,563 | $ | 66,993 | $ | — | $ | 4,061,953 | |||||||||||||||||||
Segment net income (loss) | $ | 180,215 | $ | 17,793 | $ | 16,930 | $ | (35,274) | $ | 179,664 |
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29
27 | ||||
The following table presents the components of the Discontinued operations – construction servicesnon-owner equity amount shown in the Southwest Gas Corporation 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 | |||
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Discontinued operations - construction servicesnon-owner equity | $ | 15,983 | ||
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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 | ||||||||||||
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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 | ||||||||||||
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Income before income taxes | 24,020 | 31,867 | 21,649 | 54,934 | ||||||||||||
Income tax expense | 8,708 | 12,042 | 7,842 | 20,711 | ||||||||||||
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Net income | 15,312 | 19,825 | 13,807 | 34,223 | ||||||||||||
Net income attributable to noncontrolling interests | 435 | 500 | 514 | 1,079 | ||||||||||||
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Discontinued operations - construction services - net income | $ | 14,877 | $ | 19,325 | $ | 13,293 | $ | 33,144 | ||||||||
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30
the receipt of a favorable Internal Revenue Service (“IRS”) private letter ruling relating to the tax-free nature of the transaction, and the effectiveness of a registration statement that will be filed with the U.S. Securities and Exchange Commission (the “SEC”). The application for the private letter ruling was filed with the IRS in March 2023 and the application to the ACC was filed in April 2023. See
Note 8 - Dispositions for more information.California. Additionally, through its subsidiaries, Southwest operates two regulated interstate pipelines serving portions of Southwest’s service territories.
Commission decisions on the amount and timing of relief may impact our earnings. Refer to the Summary Operating Results table below for a reconciliation of gross margin to operating margin, and refer to
Rates and Regulatory Proceedings in this Management’s Discussion and Analysis, for details of various rate proceedings.28 |
ConstructionCanada.
31
have implementedUtilities continue to implement or modified pipelinemodify system integrity management programs to enhance safety pursuant to federal and state mandates. These programs coupled with recent bonus depreciation tax deduction incentives, have resulted in a significant increase in multi-year pipelineutility system replacement projects throughout the U.S. Likewise, there has been similar attention placed on electric grid modernization through national infrastructure legislation and related initiatives. The Department of Energy estimates more than 70% of the nation’s grid transmission lines and power transformers are over 25 years old, creating vulnerability exacerbated by seasonal storm and extreme weather events.
10-K for the fiscal year ended December 31, 2022 (the “2022 Form 10-K), in addition to the Risk Factors included in these documents, and as updated from time to time.
29 |
Period Ended March 31, | ||||||||||||||||||||||||||
Three Months | Twelve Months | |||||||||||||||||||||||||
(In thousands, except per share amounts) | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
Contribution to net income (loss) | ||||||||||||||||||||||||||
Natural gas distribution | $ | 134,696 | $ | 111,795 | $ | 177,281 | $ | 180,215 | ||||||||||||||||||
Utility infrastructure services | (11,872) | (23,486) | 13,679 | 17,793 | ||||||||||||||||||||||
Pipeline and storage | (16,288) | 16,930 | (316,951) | 16,930 | ||||||||||||||||||||||
Corporate and administrative | (60,625) | (9,061) | (127,566) | (35,274) | ||||||||||||||||||||||
Net income (loss) | $ | 45,911 | $ | 96,178 | $ | (253,557) | $ | 179,664 | ||||||||||||||||||
Weighted average common shares | 68,265 | 60,737 | 67,413 | 59,919 | ||||||||||||||||||||||
Basic earnings (loss) per share | ||||||||||||||||||||||||||
Consolidated | $ | 0.67 | $ | 1.58 | $ | (3.76) | $ | 3.00 | ||||||||||||||||||
Natural Gas Distribution | ||||||||||||||||||||||||||
Reconciliation of Gross Margin to Operating Margin (Non-GAAP measure) | ||||||||||||||||||||||||||
Utility Gross Margin | $ | 259,364 | $ | 233,882 | $ | 597,222 | $ | 571,051 | ||||||||||||||||||
Plus: | ||||||||||||||||||||||||||
Operations and maintenance (excluding Admin. & General) expense | 79,696 | 73,422 | 317,344 | 276,525 | ||||||||||||||||||||||
Depreciation and amortization expense | 74,650 | 72,114 | 265,579 | 256,814 | ||||||||||||||||||||||
Operating margin | $ | 413,710 | $ | 379,418 | $ | 1,180,145 | $ | 1,104,390 |
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 | ) | — | |||||||||||||||
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Net income | $ | 10,204 | $ | 2,472 | $ | 97,376 | $ | 86,861 | $ | 162,556 | $ | 152,980 | ||||||||||||
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Average number of common shares outstanding | 47,628 | 47,481 | 47,577 | 47,464 | 47,553 | 47,442 | ||||||||||||||||||
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Basic earnings per share | ||||||||||||||||||||||||
Consolidated | $ | 0.21 | $ | 0.05 | $ | 2.05 | $ | 1.83 | $ | 3.42 | $ | 3.22 | ||||||||||||
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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 | ||||||||||||||||||
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Operating margin | $ | 167,520 | $ | 161,123 | $ | 673,984 | $ | 656,855 | $ | 941,420 | $ | 915,552 | ||||||||||||
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32
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
33
Three Months Ended March 31, | ||||||||||||||
(Thousands of dollars) | 2023 | 2022 | ||||||||||||
Regulated operations revenues | $ | 914,879 | $ | 676,539 | ||||||||||
Net cost of gas sold | 501,169 | 297,121 | ||||||||||||
Operating margin | 413,710 | 379,418 | ||||||||||||
Operations and maintenance expense | 131,188 | 119,636 | ||||||||||||
Depreciation and amortization | 74,650 | 72,114 | ||||||||||||
Taxes other than income taxes | 22,740 | 21,652 | ||||||||||||
Operating income | 185,132 | 166,016 | ||||||||||||
Other income (deductions) | 18,443 | 1,315 | ||||||||||||
Net interest deductions | (38,622) | (26,610) | ||||||||||||
Income before income taxes | 164,953 | 140,721 | ||||||||||||
Income tax expense | 30,257 | 28,926 | ||||||||||||
Contribution to consolidated results | $ | 134,696 | $ | 111,795 |
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 | ||||||
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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 | ||||||
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Operating income (loss) | 5,065 | (10,231 | ) | |||||
Other income (deductions) | 3,081 | 2,521 | ||||||
Net interest deductions | 17,421 | 16,364 | ||||||
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Income (loss) before income taxes | (9,275 | ) | (24,074 | ) | ||||
Income tax expense (benefit) | (5,251 | ) | (11,669 | ) | ||||
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Contribution to consolidated net income (loss) | $ | (4,024 | ) | $ | (12,405 | ) | ||
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and maintenance, Depreciation and amortization, and Net interest deductions.
Combined rate relief added approximately $14 million of combined margin. Amounts collected from customers associated with previously unrecovered Vintage Steel Pipe (“VSP”) and Customer-Owned Yard Line (“COYL”) programs in Arizona ($4 million) also contributed to the improvement. Additionally, an $8 million out-of-period adjusting entry in the current quarter was made, which reduced Net cost of gas sold (See
Basis of Presentation in Note 1 – Background, Organization, and Summary of Significant Accounting Policies in this Quarterly Report on Form 10-Q). Other differences include customer-provided fuel required for pipeline operations (offset in Operations and maintenance expense), and miscellaneous revenue and margin from customers outside the decoupling mechanisms.insurance related claims ($1 million).
31 |
Twelve Months Ended March 31, | ||||||||||||||
(Thousands of dollars) | 2023 | 2022 | ||||||||||||
Regulated operations revenues | $ | 2,173,409 | $ | 1,676,397 | ||||||||||
Net cost of gas sold | 993,264 | 572,007 | ||||||||||||
Operating margin | 1,180,145 | 1,104,390 | ||||||||||||
Operations and maintenance expense | 503,480 | 452,051 | ||||||||||||
Depreciation and amortization | 265,579 | 256,814 | ||||||||||||
Taxes other than income taxes | 84,285 | 81,308 | ||||||||||||
Operating income | 326,801 | 314,217 | ||||||||||||
Other income (deductions) | 10,244 | (3,794) | ||||||||||||
Net interest deductions | (127,892) | (102,004) | ||||||||||||
Income before income taxes | 209,153 | 208,419 | ||||||||||||
Income tax expense | 31,872 | 28,204 | ||||||||||||
Contribution to consolidated results | $ | 177,281 | $ | 180,215 |
Taxes
32 |
Three Months Ended March 31, | ||||||||||||||
(Thousands of dollars) | 2023 | 2022 | ||||||||||||
Utility infrastructure services revenues | $ | 653,293 | $ | 523,877 | ||||||||||
Operating expenses: | ||||||||||||||
Utility infrastructure services expenses | 603,680 | 503,232 | ||||||||||||
Depreciation and amortization | 37,870 | 37,612 | ||||||||||||
Operating income (loss) | 11,743 | (16,967) | ||||||||||||
Other income (deductions) | (680) | (486) | ||||||||||||
Net interest deductions | 22,376 | 11,131 | ||||||||||||
Loss before income taxes | (11,313) | (28,584) | ||||||||||||
Income tax benefit | (1,180) | (6,170) | ||||||||||||
Net loss | (10,133) | (22,414) | ||||||||||||
Net income attributable to noncontrolling interests | 1,739 | 1,072 | ||||||||||||
Contribution to consolidated results | $ | (11,872) | $ | (23,486) |
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 million of income associated with COLI policy cash surrender value increases, while the prior-year quarter reflected $2.3 million of COLI-related income. COLI amounts in each quarter were greater than expected.
Net interest deductions increased $1.1 million between quarters, primarily due to the September 2016 issuance of $300 million of senior notes, partially offset by reductions associated with the redemption of debt ($24.9 million of 4.75% IDRBs in September 2016) and lower interest expense associated with PGA balances as compared to the prior-year quarter.
34
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Nine-MonthUtility Infrastructure Services
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 | ||||||
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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 | ||||||
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Operating income | 163,621 | 140,983 | ||||||
Other income (deductions) | 8,744 | 6,712 | ||||||
Net interest deductions | 51,622 | 49,155 | ||||||
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Income before income taxes | 120,743 | 98,540 | ||||||
Income tax expense | 38,307 | 31,004 | ||||||
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Contribution to consolidated net income | $ | 82,436 | $ | 67,536 | ||||
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The contribution
Twelve Months Ended March 31, | ||||||||||||||
(Thousands of dollars) | 2023 | 2022 | ||||||||||||
Utility infrastructure services revenues | $ | 2,889,743 | $ | 2,318,563 | ||||||||||
Operating expenses: | ||||||||||||||
Utility infrastructure services expenses | 2,629,766 | 2,123,085 | ||||||||||||
Depreciation and amortization | 155,611 | 130,511 | ||||||||||||
Operating income | 104,366 | 64,967 | ||||||||||||
Other income (deductions) | (1,081) | 683 | ||||||||||||
Net interest deductions | 72,616 | 30,508 | ||||||||||||
Income before income taxes | 30,669 | 35,142 | ||||||||||||
Income tax expense | 10,717 | 11,406 | ||||||||||||
Net income | 19,952 | 23,736 | ||||||||||||
Net income attributable to noncontrolling interests | 6,273 | 5,943 | ||||||||||||
Contribution to consolidated results | $ | 13,679 | $ | 17,793 |
Operating margin increased $17 million between the comparative nine-month periods. Rate relief in the Arizona and California jurisdictions provided $10 million in operating margin (seeRates and Regulatory Proceedings). The remaining $7 million increase was attributable to customer growth.
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 million between periods primarily due to reduced depreciation rates in Arizona, 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 million, or 5%, increase in average gas plant in service for the current twelve-month period aswhen compared to the prior period.year, with
Taxes other than income taxes increased $3.8equipment rental costs incurred to fulfill electric infrastructure services. A loss of $7.5 million between periods primarilywas incurred on a gas infrastructure bid project during the current twelve-month period due to higher property taxes associated with net plant additionscosts than anticipated and increased property taxesscheduling delays. General and administrative costs, included in Arizona, including the impact of the Arizona property tax tracking mechanism.
Other income, which principally includes returns on COLI policies andnon-utilitytotal Utility infrastructur
Net interest deductionsthe current twelve-month period. O
35
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 million between the twelve-month periods of 2017 and 2016. The improvement was primarily due to higher operating margin and lower depreciation expense, partially offset by an increase in operations and maintenance expenses and interest expense.
Operating margin increased $26 million between periods including a combined $13 million of rate reliefgrowth in the Arizona and California jurisdictions, as well as Paiute Pipeline Company. Customer growth provided $9 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 thebusiness, including 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 the prior 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 increased $4.4 million between periods primarily due to higher property taxes 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 $300 million of senior notes. The increase was partially offsetincurred by reductions associated with the redemption of debt ($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.
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Results of Construction 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 | ||||||
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|
| |||||
Net income | 14,551 | 15,312 | ||||||
Net income attributable to noncontrolling interests | 216 | 435 | ||||||
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|
| |||||
Contribution to consolidated net income attributable to Centuri | $ | 14,335 | $ | 14,877 | ||||
|
|
|
|
Contribution to consolidated net income from construction services in the current quarter decreased by $542,000 when compared to the prior-year quarter. The decrease is primarily due to 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 pipe replacement work with existing customers. A significant portion of the increase relates to bid jobs that are expected to be substantially complete by year end.
Construction expenses increased $42 million, or 14%, between quarters due to additional pipe replacement work. Results were negatively impacted by higher 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.Riggs Distler. Gains on sale of equipment (reflected as an offset to constructionUtility infrastructure services expenses) were approximately $25,000 and $1.4 million for the third quarters of 2017 and 2016, respectively.
Depreciation and amortization decreased $1.1 million between quarters, primarily due to a $2 million reduction associated with the extension of the estimated useful lives of certain depreciable equipment during the past 12 months, partially offset by an increase in depreciation for additional equipment purchased to support the growing volume of work being performed.
37
Results of Construction Services
Nine-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 net income from construction services for the first nine months of 2017 declined by $3.6 million when compared to the prior-year period. The decrease is primarily due to higher construction costs relative to increased revenues, partially offset by a decline in depreciation and amortization.
Revenues increased $34.5 million, or 4%, in the first nine months of 2017 when compared to the prior-year period primarily due to increased pipe replacement work. Partially offsetting increases 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 millionpre-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 andstart-up costs related to the water pipe replacement project, for which Centuri is pursuing cost recovery. Gains on sale of equipment (reflected as an offset to construction expenses) were approximately $1.5approx
Depreciation and amortization decreased $7.9 million between periods, primarily due to an $8.2 million reduction in depreciation associated with the extension of the estimated useful lives of certain depreciable equipment during the past 12 months, partially offset by an increase in depreciation for additional equipment purchased to support the growing volume of work being performed.
38
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 inpre-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 higherstart-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$5.8 million for the twelve-month periods ended September 30, 2017of 2023 and 2016,2022, respectively.
39
34 | ||||||||
Three Months Ended March 31, | ||||||||||||||||||||
(Thousands of dollars) | 2023 | 2022 | ||||||||||||||||||
Regulated operations revenues | $ | 35,132 | $ | 66,993 | ||||||||||||||||
Operating expenses: | ||||||||||||||||||||
Net cost of gas sold | 6,368 | 1,797 | ||||||||||||||||||
Operations and maintenance expense | 11,378 | 24,312 | ||||||||||||||||||
Depreciation and amortization | — | 12,920 | ||||||||||||||||||
Taxes other than income taxes | 1,490 | 3,164 | ||||||||||||||||||
Goodwill impairment | 21,215 | — | ||||||||||||||||||
Operating income (loss) | (5,319) | 24,800 | ||||||||||||||||||
Other income (deductions) | 486 | 543 | ||||||||||||||||||
Net interest deductions | 2,200 | 4,382 | ||||||||||||||||||
Income (loss) before income taxes | (7,033) | 20,961 | ||||||||||||||||||
Income tax expense | 9,255 | 4,031 | ||||||||||||||||||
Contribution to consolidated results | $ | (16,288) | $ | 16,930 |
Arizona Jurisdiction
Arizona General Rate Case.
35 |
LNG (“Liquefied Natural Gas”) Facility. In January 2014,establishment under the TEAM mechanism, in December 2022, Southwest filed anits most recent TEAM rate 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 in 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 grantingpre-approval of Southwest’s application to construct the LNG facility and the deferral of costs, up to $50 million. Following the December 2014 preapproval, Southwest purchased the site for the facility and completed detailed engineering design specifications for the purpose of soliciting bids for the engineering, procurement and construction (“EPC”) of the facility. Southwest solicited requests for proposals for the EPC phase of the project, and in October 2016 made a filing with the ACC to modify the previously issued Orderproposing to update thepre-approved costs TEAM surcredit to reflect anot-to-exceed amountrefund $6.5 million of $80 million,estimated net EADIT savings, which was approved by the ACC in December 2016. Through September 2017,and will be effective May 1, 2023.
COYL Program. Southwestoriginally received approval, in connection with an earlierits 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 notrepresenting a traditionalnon-traditional configuration. Customers with this configuration were previously responsible for the cost of maintaining these lines and wereThe COYL program has been subject to the immediate cessation of natural gas service iflow-pressure leaks occurred. Effective June 2013, the ACC authorized a surchargeproceedings to recover investments since that time. In February 2023, Southwest requested approval to recover the costsoutstanding revenue requirement of depreciation andpre-tax return on the costs incurred to replace and relocate service lines and meters. The surcharge is revised annually as the program progresses. In 2014, Southwest received approval to add a “Phase II” component toapproximately $4.3 million associated with 2022 COYL investments, which will increase the COYL programrecovery rate. The new rate is anticipated to include the replacement ofnon-leaking COYLs. In the most recent annual COYL filing made in February 2017, Southwest requested to establish an annual surcharge to collect $1.8 million related to the revenue requirement associated with $12.1 million in capital projects completed under both Phase I and Phase II during 2016. Inbecome effective June 2017, the ACC issued a decision approving 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.
40
1, 2023.
California Jurisdiction
Attrition Filing. In November 2016, Southwest made its latest annual post-test year (“PTY”) 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, and $256,000 for South Lake Tahoe. This filing was approved in December 2016 and rates were made effective in January 2017. At the same time, rates were updated to recover the regulatory asset associated with the revenue decoupling mechanism, or margin tracker.
California General Rate Case. In December 2016, Southwest filed to modify the most recentSouthwest’s 2020 general rate case decision, the ACC ultimately decided to discontinue the accelerated VSP program. A filing in May 2021 proposed the recovery of previously unrecovered surcharge revenue relating to investments during 2019 and 2020, with approximately $60 million to be recovered over a three-year period. In November 2021, the ACC approved full recovery over the proposed three-year timeline with updated rates, which became effective in March 2022.
36 |
Nevada Jurisdiction
General Revenues Adjustment.In June 2016, Southwest requested authorization from the Public Utilities Commission of Nevada (“PUCN”) to adjust rates associated with itsSouthwest’s full revenue decoupling mechanism, (Generalthe General Revenues Adjustment or “GRA”(“GRA”). The filing was approved in December 2016, with rates effective January 2017. The rate adjustment is expected to refund approximately $16.7 million during 2017. In June 2017, Southwest filed to adjust the GRA surcharge effective January 2018, whichstipulation 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 at the end of April 2017. While there is no impact to net income overall from this rate adjustment, operating cash flows will be reduced as the regulatory liability balance is refunded.
Infrastructure Replacement Mechanisms.In January 2014, the PUCN approved final rules for a mechanism to defer and recover certain costs associated with accelerated replacement of infrastructure that does not otherwise currently provide incremental revenues. Associated with such mechanism, each year, Southwest files a Gas Infrastructure Replacement (“GIR”) Advance Application requesting authority to replace qualifying infrastructure and files separately as part of an annual GIR filing to reset the recovery surcharge, related to previously approved and completed projects. For projects approved in 2015 and completed in 2016, the annualized revenue was approximately $4.5 million. In September 2016, Southwest filed to adjust the GIR surcharge to recover the annual revenue requirement for amounts previously deferred. This filing was approved in December 2016 and new rates became effective January 2017. In June 2016, Southwest filed an Advance Application for projects expectedApril 1, 2022. The PUCN’s order did not include recovery of the approximate $6.6 million in deferred late payment charges related 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 largeregulatory asset associated with a COVID-19 moratorium on disconnections previously 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
41
, the deferred annualized revenue requirement is approximately $8.7 million. This filing is expected to be approved 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 consist of early vintage plastic and early vintage steel pipe, as well asplace.
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 applicationconservation and energy efficiency costs and other ARA-related mechanisms was the third such filing by Southwest subject to these regulations, necessitating a request for waiver to permit Southwest to proceedreached with the GIR program without filingparties and approved by the PUCN with rates effective July 1, 2023. Separately, in May 2022, Southwest filed an application seeking approval of its annual Conservation and Energy Efficiency Plan Report for 2021, with no proposed modifications to the previously approved $1.3 million annual budget for years 2022-2024. The parties reached a general rate case in 2017. This waiverstipulation that 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.
Conservation and Energy Efficiency (“CEE”).July 2022.
37 |
Expansion and Economic Development Legislation.In February 2015, legislation (“SB 151”)application. The parties reached a stipulation that was introduced in Nevada directing the PUCN to adopt regulations authorizing natural gas utilities to expand their infrastructure consistent with a program of economic development. This includes providing gas 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.
In November 2017, Southwest filedDecember 2021, approving Southwest’s proposal. The program opened for preapproval of a project to extend service to include the service territory of Mesquite, Nevada, in accordance with the SB 151 regulations. This project proposes the extension of existing facilities to Mesquite at an estimated cost of approximately $30 million. The cost is proposed to be recovered through a volumetric surcharge on all southern Nevada customers. A second phase is then proposed to convert existing homes to natural gas service, which will be charged as a separate surcharge to Mesquite customers only. A decision on this proposal is expected within the required210-day time period for filings of this type.
Federal Energy Regulatory Commission (“FERC”) Jurisdiction
2018 Expansion. In response to growing demandcustomer participation 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 the thirdfourth quarter of 2016. In October 2016, Paiute initiated2022.
42
the purchase and sale agreement entered into in connection with the MountainWest sale, the Company became obligated, for a period of four years following the closing of the MountainWest sale, to indemnify Williams and MountainWest for any damages and liabilities resulting from the Section 5 Rate Case, including any reduction to the current applicable rate, up to a cap of $75 million. Williams, in collaboration with the Company, agreed to a settlement of the Section 5 Rate Case, which is pending approval by the FERC. As a result of the settlement, the Company recorded a charge of $28.4 million, an amount for which it is now expected to be obligated, which is included in Goodwill impairment and loss on sale on the Company’s Consolidated Statements of Income for the three- and twelve- months ended March 31, 2023.
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 | ) | ||||
|
|
|
|
|
|
(Thousands of dollars) | March 31, 2023 | December 31, 2022 | March 31, 2022 | |||||||||||||||||
Arizona | $ | 417,931 | $ | 292,472 | $ | 255,472 | ||||||||||||||
Northern Nevada | 80,540 | 27,384 | 13,700 | |||||||||||||||||
Southern Nevada | 415,146 | 122,959 | 93,153 | |||||||||||||||||
California | 56,722 | 7,305 | 5,629 | |||||||||||||||||
$ | 970,339 | $ | 450,120 | $ | 367,954 |
Cash
38 |
other working capital changes.
Debt Maturities, and Financing
below.43
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 additional shares of common stock collectively through the Restricted Stock/Unit Plan and the Management Incentive Plan.
Southwest Gas Corporation:
Operating Cash Flows.Cash flows provided by operating activities decreased $172 million in the first nine months of 2017 as compared to 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 toResults of Natural Gas Operations andRates and Regulatory ProceedingsDebt
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.
The capital requirements and resources of the Company generally are determined independently for the natural gas operations and construction services segments. Each business activity is generally responsible for securing its own financing sources.
Southwestplant expenditures.
39 |
In March 2017, the Company filed with the Securities Exchange Commission (“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 of the shares will
44
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. SeeNote 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% 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 million of federal income taxes for 2017, resulting in a minimal amount of federal income tax being paid.
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.
The market price of natural gas spiked as a result of numerous market forces including historically low storage levels, unexpected upstream pipeline maintenance events, and cold weather conditions across the western region in the latter part of 2022 and continuing into January 2023. As a result of this increase in pricing, in January 2023, Southwest entered into a 364-day $450 million term loan in order to fund the incremental cost. This indebtedness was repaid in April 2023 (refer to
Note 5 – Debt in this Quarterly Report on Form 10-Q). We may be required to incur additional indebtedness in connection with future spikes in natural gas prices as a result of extreme weather events or otherwise.In March 2017,
45
adequate for Southwest’s working capital needs outside of funds raised through operations and
40 |
Any additional cash requirements would include the existing credit facility, equity contributions from the Company, and/or other external financing sources.
For the Twelve Months Ended | ||||||||
September 30, 2017 | December 31, 2016 | |||||||
Ratio of earnings to fixed charges | 3.50 | 3.46 |
Earnings are definedintended 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, as well as for repayment or repurchase of indebtedness (including amounts outstanding from time to time under 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)credit facilities, senior notes, or other indebtedness), and net amortized debt costs.
to provide for working capital. The Company had approximately $341.8 million available under the program as of March 31, 2023. See
Note 4 – Common Stock for more information.41 |
46
statements. All forward-looking statements are intended to be subject to the safe harbor protection provided by the Reform Act.
42 |
2022.
47
There have been no changes in the Company’s internal controls over financial reporting (as defined in Rules13a-15(f) and15d-15(f) of the Exchange Act) during the third quarter of 2017 that have materially affected, or are likely to materially affect, the Company’s internal controls over financial reporting.
Based on the most recent evaluation, as of September 30, 2017, management of Southwest Gas Corporation, including the Chief Executive Officer and Chief Financial Officer, believebelieves the Company’s and Southwest’s disclosure controls and procedures are effective at attaining the level of reasonable assurance noted above.
43 |
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- | The following materials from the Quarterly Report on Form 10-Q of Southwest Gas Holdings, Inc. and Southwest Gas Corporation for the quarter ended March 31, 2023, were formatted in Inline XBRL (Extensible Business Reporting Language): (1) Southwest Gas Holdings, Inc. and Subsidiaries Condensed Consolidated Balance Sheets, (ii) Southwest Gas Holdings, Inc. and Subsidiaries Condensed Consolidated Statements of Income, (iii) Southwest Gas Holdings, Inc. and Subsidiaries Condensed Consolidated Statements of Comprehensive Income, (iv) Southwest Gas Holdings, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows, (v) Southwest Gas Holdings, Inc. and Subsidiaries Condensed Consolidated Statements of Equity, (vi) Southwest Gas Corporation and Subsidiaries Condensed Consolidated Balance Sheets, (vii) Southwest Gas Corporation and Subsidiaries Condensed Consolidated Statements of Income, (viii) Southwest Gas Corporation and Subsidiaries Condensed Consolidated Statements of Comprehensive Income, (ix) Southwest Gas Corporation and Subsidiaries Condensed Consolidated Statements of Cash Flows, (x) Southwest Gas Corporation and Subsidiaries Condensed Consolidated Statements of Equity. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||||||||||||
104# | Cover Page Interactive Data File (embedded within the Inline XBRL document). | |||||||||||||
# Filed herewith. |
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Southwest Gas Holdings, Inc. | ||
(Registrant) |
Date: November 7, 2017
/s/ | ||
Vice President/Controller and Chief Accounting Officer |
Southwest Gas Corporation | ||
(Registrant) |
Date: November 7, 2017
/s/ LORI L. COLVIN | ||
| ||
Vice President/Controller and Chief Accounting Officer |
45 |
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