UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2023~~March 31, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission

File Number

Exact name of registrant as specified in its charter and
principal office address and telephone number

State of
Incorporation

I.R.S.
Employer Identification No.

001-37976

Southwest Gas Holdings, Inc.

Delaware

81-3881866

8360 S. Durango Drive

Post Office Box 98510

Las Vegas,

Nevada

89193-8510

(702)

876-7237

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

Preferred Stock Purchase Rights

N/A

New York Stock Exchange

Indicate by check mark whether each registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that each registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether each registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that each registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Southwest Gas Holdings, Inc.:

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

Southwest Gas Corporation:

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☐

Emerging growth company

☐

Indicate by check mark whether each registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

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

Southwest Gas Holdings, Inc. Common Stock, $1 Par Value, ~~71,519,025~~71,669,140 shares as of ~~October 31, 2023.~~April 26, 2024.

All of the outstanding shares of common stock ($1 par value) of Southwest Gas Corporation were held by Southwest Gas Holdings, Inc. as of ~~October 31, 2023.~~April 26, 2024.

SOUTHWEST GAS CORPORATION MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION (H)(1)(a) and (b) OF FORM 10-Q AND IS THEREFORE FILING THIS REPORT WITH THE REDUCED DISCLOSURE FORMAT AS PERMITTED BY GENERAL INSTRUCTION H(2).


SOUTHWEST GAS HOLDINGS, INC.						Form 10-Q
SOUTHWEST GAS CORPORATION						~~September 30, 2023~~March 31, 2024

FILING FORMAT

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

Part I—Financial information in this Quarterly Report on Form 10-Q includes separate financial statements (i.e., balance sheets, statements of income, statements of comprehensive income, statements of cash flows, and statements of equity) for Southwest Gas Holdings, Inc. and Southwest Gas Corporation, in that order. The Notes to the Condensed Consolidated Financial Statements are presented on a combined basis for both entities. All Items other than Part I – Item 1 are combined for the reporting companies.


			2


SOUTHWEST GAS HOLDINGS, INC.						Form 10-Q
SOUTHWEST GAS CORPORATION						~~September 30, 2023~~March 31, 2024

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SOUTHWEST GAS HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Thousands of dollars, except par value)

(Unaudited)


			September 30, 2023		December 31, 2022
		March 31, 2024					March 31, 2024	December 31, 2023
ASSETS	ASSETS
Regulated operations plant:	Regulated operations plant:
Regulated operations plant:
Regulated operations plant:
Gas plant
Gas plant
Gas plant	Gas plant		$	9,892,766	$	9,453,907
Less: accumulated depreciation	Less: accumulated depreciation		(2,780,482)		(2,674,157)
Construction work in progress	Construction work in progress		272,969		244,750
Net regulated operations plant	Net regulated operations plant		7,385,253		7,024,500
Other property and investments, net	Other property and investments, net		1,254,065		1,281,172
Current assets:	Current assets:
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents	Cash and cash equivalents		104,939		123,078
Accounts receivable, net of allowances	Accounts receivable, net of allowances		903,365		866,246
Accrued utility revenue	Accrued utility revenue		44,600		88,100
Income taxes receivable, net	Income taxes receivable, net		4,268		8,738
Deferred purchased gas costs	Deferred purchased gas costs		687,137		450,120
Prepaid and other current assets	Prepaid and other current assets		229,696		433,850
Current assets held for sale	Current assets held for sale		24,480		1,737,530
Total current assets	Total current assets		1,998,485		3,707,662
Noncurrent assets:	Noncurrent assets:
Goodwill	Goodwill		787,433		787,250
Goodwill
Goodwill
Deferred income taxes	Deferred income taxes		253		82
Deferred charges and other assets	Deferred charges and other assets		410,793		395,948
Total noncurrent assets	Total noncurrent assets		1,198,479		1,183,280
Total assets	Total assets		$	11,836,282	$	13,196,614
CAPITALIZATION AND LIABILITIES	CAPITALIZATION AND LIABILITIES
Capitalization:	Capitalization:
Common stock, $1 par (authorized - 120,000,000 shares; issued and outstanding - 71,515,428 and 67,119,143 shares)			$	73,145	$	68,749
Capitalization:
Capitalization:
Common stock, $1 par (authorized - 120,000,000 shares; issued and outstanding - 71,665,592 and 71,563,750 shares)
Common stock, $1 par (authorized - 120,000,000 shares; issued and outstanding - 71,665,592 and 71,563,750 shares)
Common stock, $1 par (authorized - 120,000,000 shares; issued and outstanding - 71,665,592 and 71,563,750 shares)
Additional paid-in capital	Additional paid-in capital		2,539,759		2,287,183
Accumulated other comprehensive loss, net	Accumulated other comprehensive loss, net		(43,523)		(44,242)
Retained earnings	Retained earnings		669,364		747,069
Total equity	Total equity		3,238,745		3,058,759
Redeemable noncontrolling interests	Redeemable noncontrolling interests		145,157		159,349
Long-term debt, less current maturities	Long-term debt, less current maturities		5,235,539		4,403,299
Total capitalization	Total capitalization		8,619,441		7,621,407
Current liabilities:	Current liabilities:
Current maturities of long-term debt	Current maturities of long-term debt		42,335		44,557
Current maturities of long-term debt
Current maturities of long-term debt
Short-term debt	Short-term debt		57,500		1,542,806
Accounts payable	Accounts payable		255,251		662,090
Customer deposits	Customer deposits		47,206		51,182
Income taxes payable, net	Income taxes payable, net		267		2,690
Accrued general taxes	Accrued general taxes		75,932		67,094
Accrued interest	Accrued interest		46,837		38,556

Other current liabilities	Other current liabilities		527,201		369,743
Current liabilities held for sale			—		644,245
Total current liabilities	Total current liabilities		1,052,529		3,422,963
Deferred income taxes and other credits:	Deferred income taxes and other credits:
Deferred income taxes and investment tax credits, net
Deferred income taxes and investment tax credits, net
Deferred income taxes and investment tax credits, net	Deferred income taxes and investment tax credits, net		742,078		682,067
Accumulated removal costs	Accumulated removal costs		454,000		445,000
Other deferred credits and other long-term liabilities	Other deferred credits and other long-term liabilities		968,234		1,025,177
Total deferred income taxes and other credits	Total deferred income taxes and other credits		2,164,312		2,152,244
Total capitalization and liabilities	Total capitalization and liabilities		$	11,836,282	$	13,196,614

The accompanying notes are an integral part of these statements.


			3


SOUTHWEST GAS HOLDINGS, INC.						Form 10-Q
SOUTHWEST GAS CORPORATION						~~September 30, 2023~~March 31, 2024

SOUTHWEST GAS HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)


			Three Months Ended September 30,				Nine Months Ended September 30,				Twelve Months Ended September 30,
		Three Months Ended March 31,															Three Months Ended March 31,
			2023		2022		2023		2022		2023		2022		2024	2023
Operating revenues:	Operating revenues:
Regulated operations revenues
Regulated operations revenues
Regulated operations revenues	Regulated operations revenues		$	394,603	$	367,122	$	1,832,480	$	1,550,684	$	2,481,478	$	2,001,898
Utility infrastructure services revenues	Utility infrastructure services revenues		774,889		758,466		2,233,961		1,988,433		3,005,855		2,621,646
Total operating revenues	Total operating revenues		1,169,492		1,125,588		4,066,441		3,539,117		5,487,333		4,623,544
Operating expenses:	Operating expenses:
Net cost of gas sold
Net cost of gas sold
Net cost of gas sold	Net cost of gas sold		170,056		100,991		908,646		547,769		1,159,937		682,449
Operations and maintenance	Operations and maintenance		126,851		154,236		404,554		479,330		561,990		618,026
Depreciation and amortization	Depreciation and amortization		105,520		116,933		329,745		347,589		452,611		450,960
Taxes other than income taxes	Taxes other than income taxes		21,147		23,356		66,981		70,778		89,586		90,987
Utility infrastructure services expenses	Utility infrastructure services expenses		685,687		680,135		2,005,084		1,829,560		2,704,842		2,403,503
Goodwill impairment and loss on sale	Goodwill impairment and loss on sale		—		—		71,230		—		526,655		—
Total operating expenses	Total operating expenses		1,109,261		1,075,651		3,786,240		3,275,026		5,495,621		4,245,925
Operating income (loss)			60,231		49,937		280,201		264,091		(8,288)		377,619
Operating income
Other income and (expenses):	Other income and (expenses):
Net interest deductions	Net interest deductions		(71,998)		(64,373)		(218,679)		(165,942)		(295,487)		(203,939)
Net interest deductions
Net interest deductions
Other income	Other income		14,464		1,593		52,528		2		46,337		478
Total other income and (expenses)			(57,534)		(62,780)		(166,151)		(165,940)		(249,150)		(203,461)
Income (loss) before income taxes			2,697		(12,843)		114,050		98,151		(257,438)		174,158
Income tax expense (benefit)			(1,270)		(1,525)		32,174		18,300		(61,779)		23,130
Net income (loss)			3,967		(11,318)		81,876		79,851		(195,659)		151,028
Net income attributable to noncontrolling interests			736		991		3,856		2,557		6,905		3,791
Net income (loss) attributable to Southwest Gas Holdings, Inc.			$	3,231	$	(12,309)	$	78,020	$	77,294	$	(202,564)	$	147,237
Earnings (loss) per share:
Total other (expenses)
Income before income taxes
Income tax expense
Net income
Net income (loss) attributable to noncontrolling interests
Net income attributable to Southwest Gas Holdings, Inc.
Earnings per share:
Basic
Basic
Basic	Basic		$	0.05	$	(0.18)	$	1.11	$	1.19	$	(2.91)	$	2.30
Diluted	Diluted		$	0.04	$	(0.18)	$	1.10	$	1.19	$	(2.91)	$	2.30
Weighted average shares:	Weighted average shares:
Basic	Basic		71,626		67,157		70,488		65,004		69,660		63,905
Basic
Basic
Diluted	Diluted		71,851		67,157		70,676		65,148		69,660		64,051

The accompanying notes are an integral part of these statements.


			4


SOUTHWEST GAS HOLDINGS, INC.						Form 10-Q
SOUTHWEST GAS CORPORATION						~~September 30, 2023~~March 31, 2024

SOUTHWEST GAS HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Thousands of dollars)

(Unaudited)

Three Months Ended
September 30, Nine Months Ended
September 30, Twelve Months Ended
September 30,
2023 2022 2023 2022 2023 2022
Net income (loss) $ 3,967 $ (11,318) $ 81,876 $ 79,851 $ (195,659) $ 151,028
Other comprehensive income (loss), net of tax
Defined benefit pension plans:
Net actuarial gain — — — — 3,099 44,974
Amortization of prior service cost 33 34 99 100 132 282
Amortization of net actuarial loss 253 6,616 760 19,847 7,374 28,321
Regulatory adjustment (90) (5,524) (270) (16,571) (5,156) (61,767)
Net defined benefit pension plans 196 1,126 589 3,376 5,449 11,810
Forward-starting interest rate swaps (“FSIRS”):
Amounts reclassified into net income — — — 416 — 828
Net forward-starting interest rate swaps — — — 416 — 828
Foreign currency translation adjustments (2,261) (5,830) 130 (7,263) 1,260 (6,919)
Total other comprehensive income, net of tax (2,065) (4,704) 719 (3,471) 6,709 5,719
Comprehensive income (loss) 1,902 (16,022) 82,595 76,380 (188,950) 156,747
Comprehensive income attributable to noncontrolling interests 736 991 3,856 2,557 6,905 3,791
Comprehensive income (loss) attributable to Southwest Gas Holdings, Inc. $ 1,166 $ (17,013) $ 78,739 $ 73,823 $ (195,855) $ 152,956


	Three Months Ended March 31,
	2024		2023
Net income	$	87,562	$	47,650
Other comprehensive income, net of tax
Defined benefit pension plans:

Amortization of prior service cost	33		33
Amortization of net actuarial loss	1,451		253
Regulatory adjustment	(1,100)		(90)
Net defined benefit pension plans	384		196
Foreign currency translation adjustments	(2,819)		97
Total other comprehensive income (loss), net of tax	(2,435)		293
Comprehensive income	85,127		47,943
Comprehensive income (loss) attributable to noncontrolling interests	(175)		1,739
Comprehensive income attributable to Southwest Gas Holdings, Inc.	$	85,302	$	46,204

The accompanying notes are an integral part of these statements.


			5


SOUTHWEST GAS HOLDINGS, INC.						Form 10-Q
SOUTHWEST GAS CORPORATION						~~September 30, 2023~~March 31, 2024

SOUTHWEST GAS HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Thousands of dollars)

(Unaudited)


			Nine Months Ended September 30,				Twelve Months Ended September 30,
		Three Months Ended March 31,											Three Months Ended March 31,
			2023		2022		2023		2022		2024	2023
CASH FLOW FROM OPERATING ACTIVITIES:	CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss)			$	81,876	$	79,851	$	(195,659)	$	151,028
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net income
Net income
Net income
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization
Depreciation and amortization
Depreciation and amortization	Depreciation and amortization		329,745		347,589		452,611		450,960
Impairment of assets and other charges	Impairment of assets and other charges		71,230		—		526,655		—
Deferred income taxes	Deferred income taxes		45,317		22,955		(49,686)		38,793
Gains on sale of property and equipment	Gains on sale of property and equipment		(3,090)		(5,215)		(5,740)		(6,756)
Changes in undistributed stock compensation	Changes in undistributed stock compensation		8,557		7,855		10,148		9,473
Equity AFUDC	Equity AFUDC		(82)		(912)		365		(912)
Changes in current assets and liabilities:	Changes in current assets and liabilities:
Accounts receivable, net of allowances	Accounts receivable, net of allowances		(40,232)		(78,719)		(155,288)		(68,192)
Accounts receivable, net of allowances
Accounts receivable, net of allowances
Accrued utility revenue	Accrued utility revenue		43,500		43,600		(3,300)		(1,600)
Deferred purchased gas costs	Deferred purchased gas costs		(252,022)		(92,200)		(307,037)		(142,518)
Accounts payable	Accounts payable		(360,554)		(29,353)		(37,292)		72,159
Accrued taxes	Accrued taxes		12,687		18,352		12,264		5,673
Other current assets and liabilities	Other current assets and liabilities		315,728		(1,039)		108,914		(113,537)
Changes in deferred charges and other assets	Changes in deferred charges and other assets		1,243		16,417		1,712		10,832
Changes in other liabilities and deferred credits	Changes in other liabilities and deferred credits		(55,469)		(25,826)		(56,128)		(42,186)
Net cash provided by operating activities			198,434		303,355		302,539		363,217
Net cash provided by (used in) operating activities
CASH FLOW FROM INVESTING ACTIVITIES:	CASH FLOW FROM INVESTING ACTIVITIES:
Construction expenditures and property additions	Construction expenditures and property additions		(664,590)		(612,516)		(911,495)		(821,405)
Acquisition of businesses, net of cash acquired			—		(18,809)		—		(1,542,674)
Construction expenditures and property additions
Construction expenditures and property additions
Proceeds from the sale of business, net of cash sold	Proceeds from the sale of business, net of cash sold		1,022,483		—		1,022,483		—
Proceeds from the sale of property
Changes in customer advances	Changes in customer advances		(6,974)		23,222		(8,690)		31,256
Other	Other		6,147		4,005		19,964		7,506
Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities		357,066		(604,098)		122,262		(2,325,317)
CASH FLOW FROM FINANCING ACTIVITIES:	CASH FLOW FROM FINANCING ACTIVITIES:
Issuance of common stock, net	Issuance of common stock, net		249,238		459,051		252,015		461,880
Issuance of common stock, net
Issuance of common stock, net
Centuri distribution to redeemable noncontrolling interest	Centuri distribution to redeemable noncontrolling interest		(39,894)		(39,649)		(39,894)		(39,649)
Dividends paid	Dividends paid		(130,232)		(118,980)		(171,815)		(154,910)
Issuance of long-term debt, net	Issuance of long-term debt, net		1,043,602		770,240		1,341,167		775,976
Retirement of long-term debt	Retirement of long-term debt		(168,127)		(422,356)		(245,685)		(468,205)
Change in short-term portion of credit facility
Change in long-term credit facility and commercial paper	Change in long-term credit facility and commercial paper		(50,000)		8,000		(138,000)		138,000
Issuance of short-term debt	Issuance of short-term debt		450,000		—		450,000		1,850,000
Other changes in short-term debt			(1,937,747)		(380,253)		(1,923,687)		(593,253)
Repayment of short-term debt

Withholding remittance - share-based compensation
Withholding remittance - share-based compensation
Withholding remittance - share-based compensation	Withholding remittance - share-based compensation		(1,742)		(2,105)		(2,299)		(2,115)
Other, including principal payments on finance leases	Other, including principal payments on finance leases		(12,642)		(19,929)		(16,885)		(16,303)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities		(597,544)		254,019		(495,083)		1,951,421
Effects of currency translation on cash and cash equivalents	Effects of currency translation on cash and cash equivalents		102		(701)		(51)		(739)
Change in cash and cash equivalents	Change in cash and cash equivalents		(41,942)		(47,425)		(70,333)		(11,418)
Cash and cash equivalents included in current assets held for sale at beginning of period	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	Cash and cash equivalents at beginning of period		123,078		222,697		175,272		186,690
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period		$	104,939	$	175,272	$	104,939	$	175,272
SUPPLEMENTAL INFORMATION:	SUPPLEMENTAL INFORMATION:
Interest paid, net of amounts capitalized	Interest paid, net of amounts capitalized		$	196,609	$	146,792	$	269,642	$	194,016
Interest paid, net of amounts capitalized
Interest paid, net of amounts capitalized
Income taxes paid, net	Income taxes paid, net		$	5,957	$	10,317	$	7,641	$	6,860

The accompanying notes are an integral part of these statements.


			6


SOUTHWEST GAS HOLDINGS, INC.						Form 10-Q
SOUTHWEST GAS CORPORATION						~~September 30, 2023~~March 31, 2024

SOUTHWEST GAS HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(In thousands, except per share amounts)

(Unaudited)


						Three Months Ended September 30,				Nine Months Ended September 30,
						2023		2022		2023		2022
					Three Months Ended March 31,										Three Months Ended March 31,
					2024									2024		2023
Common stock shares	Common stock shares
		Beginning balances				71,473		67,004		67,119		60,422
				Common stock issuances		42		60		4,396		6,642
		Ending balances				71,515		67,064		71,515		67,064
		Beginning balances
		Beginning balances
		Beginning balances
			Common stock issuances
	Ending balances
Common stock amount	Common stock amount
		Beginning balances				$	73,103	$	68,634	$	68,749	$	62,052
				Common stock issuances		42		60		4,396		6,642
		Ending balances				73,145		68,694		73,145		68,694
		Beginning balances
		Beginning balances
		Beginning balances
			Common stock issuances
	Ending balances
Additional paid-in capital	Additional paid-in capital
		Beginning balances				2,534,223		2,279,493		2,287,183		1,824,216
				Common stock issuances		5,536		3,757		252,576		459,034
		Ending balances				2,539,759		2,283,250		2,539,759		2,283,250
		Beginning balances
		Beginning balances
		Beginning balances
			Common stock issuances
			Promissory notes in association with redeemable noncontrolling interest
	Ending balances
Accumulated other comprehensive loss	Accumulated other comprehensive loss
		Beginning balances				(41,458)		(45,528)		(44,242)		(46,761)
				Foreign currency exchange translation adjustment		(2,261)		(5,830)		130		(7,263)
				Net actuarial gain arising during period, less amortization of unamortized benefit plan cost, net of tax		196		1,126		589		3,376
				FSIRS amounts reclassified to net income, net of tax		—		—		—		416
		Ending balances				(43,523)		(50,232)		(43,523)		(50,232)
		Beginning balances
		Beginning balances
		Beginning balances
			Foreign currency exchange translation adjustment
			Net actuarial gain arising during period, less amortization of unamortized benefit plan cost, net of tax
	Ending balances
Retained earnings	Retained earnings
		Beginning balances				696,958		1,156,253		747,069		1,114,313
				Net income (loss)		3,231		(12,309)		78,020		77,294
				Dividends declared		(44,584)		(41,696)		(133,879)		(125,337)
				Redemption value adjustments		13,759		8,955		(21,846)		44,933
		Ending balances				669,364		1,111,203		669,364		1,111,203
		Beginning balances
		Beginning balances
		Beginning balances
			Net income
			Dividends declared
			Redemption value adjustments
	Ending balances
Total equity ending balances	Total equity ending balances					$	3,238,745	$	3,412,915	$	3,238,745	$	3,412,915
Dividends declared per common share	Dividends declared per common share					$	0.62	$	0.62	$	1.86	$	1.86

The accompanying notes are an integral part of these statements.


			7


SOUTHWEST GAS HOLDINGS, INC.						Form 10-Q
SOUTHWEST GAS CORPORATION						~~September 30, 2023~~March 31, 2024

SOUTHWEST GAS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Thousands of dollars)

(Unaudited)


			September 30, 2023		December 31, 2022
		March 31, 2024					March 31, 2024	December 31, 2023
ASSETS	ASSETS
Regulated operations plant:	Regulated operations plant:
Regulated operations plant:
Regulated operations plant:
Gas plant
Gas plant
Gas plant	Gas plant		$	9,892,766	$	9,453,907
Less: accumulated depreciation	Less: accumulated depreciation		(2,780,482)		(2,674,157)
Construction work in progress	Construction work in progress		272,969		244,750
Net regulated operations plant	Net regulated operations plant		7,385,253		7,024,500
Other property and investments, net	Other property and investments, net		147,461		169,397
Current assets:	Current assets:
Cash and cash equivalents	Cash and cash equivalents		70,970		51,823
Cash and cash equivalents
Cash and cash equivalents
Accounts receivable, net of allowance	Accounts receivable, net of allowance		167,805		234,081
Accrued utility revenue	Accrued utility revenue		44,600		88,100
Income taxes receivable, net	Income taxes receivable, net		159		103
Deferred purchased gas costs	Deferred purchased gas costs		687,137		450,120
Receivable from parent			—		2,130

Prepaid and other current assets
Prepaid and other current assets
Prepaid and other current assets	Prepaid and other current assets		191,212		401,789
Current assets held for sale	Current assets held for sale		24,480		—
Total current assets	Total current assets		1,186,363		1,228,146
Noncurrent assets:	Noncurrent assets:
Goodwill
Goodwill
Goodwill	Goodwill		11,155		11,155
Deferred charges and other assets	Deferred charges and other assets		388,529		370,483
Total noncurrent assets	Total noncurrent assets		399,684		381,638
Total assets	Total assets		$	9,118,761	$	8,803,681
CAPITALIZATION AND LIABILITIES	CAPITALIZATION AND LIABILITIES
Capitalization:	Capitalization:
Capitalization:
Capitalization:
Common stock
Common stock
Common stock	Common stock		$	49,112	$	49,112
Additional paid-in capital	Additional paid-in capital		2,157,274		1,622,969
Accumulated other comprehensive loss, net	Accumulated other comprehensive loss, net		(37,672)		(38,261)
Retained earnings	Retained earnings		966,582		935,355
Total equity	Total equity		3,135,296		2,569,175
Long-term debt, less current maturities	Long-term debt, less current maturities		3,500,684		3,251,296
Total capitalization	Total capitalization		6,635,980		5,820,471
Current liabilities:	Current liabilities:
Short-term debt			—		225,000

Accounts payable

Accounts payable

Accounts payable	Accounts payable		115,267		497,046
Customer deposits	Customer deposits		47,206		51,182

Accrued general taxes
Accrued general taxes
Accrued general taxes	Accrued general taxes		75,932		67,094
Accrued interest	Accrued interest		38,120		29,569
Payable to parent	Payable to parent		1,822		—
Other current liabilities	Other current liabilities		256,365		150,817
Total current liabilities	Total current liabilities		534,712		1,020,708
Deferred income taxes and other credits:	Deferred income taxes and other credits:
Deferred income taxes and investment tax credits, net	Deferred income taxes and investment tax credits, net		727,483		683,948
Deferred income taxes and investment tax credits, net
Deferred income taxes and investment tax credits, net
Accumulated removal costs	Accumulated removal costs		454,000		445,000
Other deferred credits and other long-term liabilities	Other deferred credits and other long-term liabilities		766,586		833,554
Total deferred income taxes and other credits	Total deferred income taxes and other credits		1,948,069		1,962,502
Total capitalization and liabilities	Total capitalization and liabilities		$	9,118,761	$	8,803,681

The accompanying notes are an integral part of these statements.


			8


SOUTHWEST GAS HOLDINGS, INC.						Form 10-Q
SOUTHWEST GAS CORPORATION						~~September 30, 2023~~March 31, 2024

SOUTHWEST GAS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Thousands of dollars)

(Unaudited)


			Three Months Ended September 30,				Nine Months Ended September 30,				Twelve Months Ended September 30,
		Three Months Ended March 31,															Three Months Ended March 31,
			2023		2022		2023		2022		2023		2022		2024	2023
Regulated operations revenues	Regulated operations revenues		$	394,603	$	303,944	$	1,797,348	$	1,358,425	$	2,373,992	$	1,809,639
Operating expenses:	Operating expenses:
Net cost of gas sold
Net cost of gas sold
Net cost of gas sold	Net cost of gas sold		170,056		100,441		902,278		544,216		1,147,278		678,896
Operations and maintenance	Operations and maintenance		122,270		121,537		378,189		368,984		501,133		478,554
Depreciation and amortization	Depreciation and amortization		69,268		64,390		218,763		192,434		289,372		258,144
Taxes other than income taxes	Taxes other than income taxes		21,147		20,693		65,491		62,443		86,245		82,652
Total operating expenses	Total operating expenses		382,741		307,061		1,564,721		1,168,077		2,024,028		1,498,246
Operating income (loss)			11,862		(3,117)		232,627		190,348		349,964		311,393
Operating income
Other income and (expenses):	Other income and (expenses):
Net interest deductions	Net interest deductions		(35,772)		(29,417)		(111,498)		(84,660)		(142,718)		(110,957)
Other income (deductions)			14,537		1,678		51,722		(440)		45,278		(97)
Total other income and (expenses)			(21,235)		(27,739)		(59,776)		(85,100)		(97,440)		(111,054)
Income (loss) before income taxes			(9,373)		(30,856)		172,851		105,248		252,524		200,339
Income tax expense (benefit)			(6,122)		(8,657)		22,286		17,918		34,909		28,458
Net income (loss)			$	(3,251)	$	(22,199)	$	150,565	$	87,330	$	217,615	$	171,881
Net interest deductions
Net interest deductions
Other income
Total other (expenses)
Income before income taxes
Income tax expense
Net income

The accompanying notes are an integral part of these statements.


			9


SOUTHWEST GAS HOLDINGS, INC.						Form 10-Q
SOUTHWEST GAS CORPORATION						~~September 30, 2023~~March 31, 2024

SOUTHWEST GAS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Thousands of dollars)

(Unaudited)


		Three Months Ended March 31,															Three Months Ended March 31,
			Three Months Ended September 30,				Nine Months Ended September 30,				Twelve Months Ended September 30,				2024	2023
			2023		2022		2023		2022		2023		2022
Net income (loss)			$	(3,251)	$	(22,199)	$	150,565	$	87,330	$	217,615	$	171,881
Net income
Other comprehensive income, net of tax	Other comprehensive income, net of tax
Defined benefit pension plans:	Defined benefit pension plans:
Net actuarial gain			—		—		—		—		3,099		44,974
Defined benefit pension plans:
Defined benefit pension plans:

Amortization of prior service cost	Amortization of prior service cost		33		34		99		100		132		282

Amortization of prior service cost

Amortization of prior service cost
Amortization of net actuarial loss	Amortization of net actuarial loss		253		6,616		760		19,847		7,374		28,321
Regulatory adjustment	Regulatory adjustment		(90)		(5,524)		(270)		(16,571)		(5,156)		(61,767)
Net defined benefit pension plans	Net defined benefit pension plans		196		1,126		589		3,376		5,449		11,810
Forward-starting interest rate swaps (“FSIRS”):
Amounts reclassified into net income (loss)			—		—		—		416		—		828
Net forward-starting interest rate swaps			—		—		—		416		—		828
Total other comprehensive income, net of tax	Total other comprehensive income, net of tax		196		1,126		589		3,792		5,449		12,638
Comprehensive income (loss)			$	(3,055)	$	(21,073)	$	151,154	$	91,122	$	223,064	$	184,519
Comprehensive income

The accompanying notes are an integral part of these statements.


			10


SOUTHWEST GAS HOLDINGS, INC.						Form 10-Q
SOUTHWEST GAS CORPORATION						~~September 30, 2023~~March 31, 2024

SOUTHWEST GAS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Thousands of dollars)

(Unaudited)


		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,

		Nine Months Ended September 30,				Twelve Months Ended September 30,
		2023		2022		2023		2022
CASH FLOW FROM OPERATING ACTIVITIES:	CASH FLOW FROM OPERATING ACTIVITIES:
CASH FLOW FROM OPERATING ACTIVITIES:
CASH FLOW FROM OPERATING ACTIVITIES:
Net income	Net income	$	150,565	$	87,330	$	217,615	$	171,881
Adjustments to reconcile net income to net cash provided by operating activities:
Net income
Net income
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization
Depreciation and amortization
Depreciation and amortization	Depreciation and amortization	218,763		192,434		289,372		258,144
Deferred income taxes	Deferred income taxes	43,348		26,579		59,156		44,016
Gain on sale of property		(136)		(1,503)		(136)		(1,503)
Deferred income taxes
Deferred income taxes
Changes in undistributed stock compensation
Changes in undistributed stock compensation
Changes in undistributed stock compensation	Changes in undistributed stock compensation	5,395		4,993		6,178		5,948
Equity AFUDC	Equity AFUDC	—		(248)		248		(248)
Equity AFUDC
Equity AFUDC
Changes in current assets and liabilities:
Changes in current assets and liabilities:
Changes in current assets and liabilities:	Changes in current assets and liabilities:
Accounts receivable, net of allowance	Accounts receivable, net of allowance	66,275		66,048		(64,187)		(188)
Accounts receivable, net of allowance
Accounts receivable, net of allowance
Accrued utility revenue
Accrued utility revenue
Accrued utility revenue	Accrued utility revenue	43,500		43,600		(3,300)		(1,600)
Deferred purchased gas costs	Deferred purchased gas costs	(237,017)		(90,206)		(305,786)		(140,524)
Deferred purchased gas costs
Deferred purchased gas costs
Accounts payable
Accounts payable
Accounts payable	Accounts payable	(346,579)		(71,899)		(31,404)		28,401
Accrued taxes	Accrued taxes	8,782		18,725		11,811		21,082
Accrued taxes
Accrued taxes
Other current assets and liabilities
Other current assets and liabilities
Other current assets and liabilities	Other current assets and liabilities	291,863		(5,908)		109,034		(94,787)
Changes in deferred charges and other assets	Changes in deferred charges and other assets	(21,750)		1,112		(24,556)		(8,905)
Changes in deferred charges and other assets
Changes in deferred charges and other assets
Changes in other liabilities and deferred credits	Changes in other liabilities and deferred credits	(54,894)		(26,467)		(56,117)		(42,948)
Net cash provided by operating activities		168,115		244,590		207,928		238,769
Changes in other liabilities and deferred credits
Changes in other liabilities and deferred credits
Net cash provided by (used in) operating activities
Net cash provided by (used in) operating activities
Net cash provided by (used in) operating activities
CASH FLOW FROM INVESTING ACTIVITIES:
CASH FLOW FROM INVESTING ACTIVITIES:
CASH FLOW FROM INVESTING ACTIVITIES:	CASH FLOW FROM INVESTING ACTIVITIES:
Construction expenditures and property additions	Construction expenditures and property additions	(581,190)		(485,825)		(778,496)		(672,410)
Construction expenditures and property additions
Construction expenditures and property additions
Proceeds from the sale of property
Proceeds from the sale of property
Proceeds from the sale of property
Changes in customer advances
Changes in customer advances
Changes in customer advances	Changes in customer advances	(6,974)		23,222		(8,690)		31,255
Other	Other	670		(1,005)		8,592		(1,102)
Other
Other
Net cash used in investing activities
Net cash used in investing activities
Net cash used in investing activities	Net cash used in investing activities	(587,494)		(463,608)		(778,594)		(642,257)
CASH FLOW FROM FINANCING ACTIVITIES:	CASH FLOW FROM FINANCING ACTIVITIES:
Contributions from parent		530,000		—		530,000		—
CASH FLOW FROM FINANCING ACTIVITIES:
CASH FLOW FROM FINANCING ACTIVITIES:
Dividends paid
Dividends paid
Dividends paid	Dividends paid	(111,200)		(92,200)		(141,200)		(121,600)
Issuance of long-term debt, net	Issuance of long-term debt, net	297,759		593,862		595,560		593,862
Retirement of long-term debt		—		(275,000)		—		(275,000)
Issuance of long-term debt, net
Issuance of long-term debt, net

Change in long-term credit facility and commercial paper

Change in long-term credit facility and commercial paper

Change in long-term credit facility and commercial paper	Change in long-term credit facility and commercial paper	(50,000)		8,000		(138,000)		138,000
Issuance of short-term debt	Issuance of short-term debt	450,000		—		450,000		—
Other changes in short-term debt		(675,000)		(25,000)		(675,000)		(25,000)
Issuance of short-term debt
Issuance of short-term debt
Repayment of short-term debt
Repayment of short-term debt
Repayment of short-term debt

Withholding remittance - share-based compensation

Withholding remittance - share-based compensation

Withholding remittance - share-based compensation	Withholding remittance - share-based compensation	(1,528)		(2,011)		(2,086)		(2,020)
Other	Other	(1,505)		(2,173)		(2,789)		(2,361)
Net cash provided by financing activities		438,526		205,478		616,485		305,881
Other
Other
Net cash provided by (used in) financing activities
Net cash provided by (used in) financing activities
Net cash provided by (used in) financing activities

Change in cash and cash equivalents

Change in cash and cash equivalents

Change in cash and cash equivalents	Change in cash and cash equivalents	19,147		(13,540)		45,819		(97,607)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	51,823		38,691		25,151		122,758
Cash and cash equivalents at beginning of period
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Cash and cash equivalents at end of period
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	70,970	$	25,151	$	70,970	$	25,151
SUPPLEMENTAL INFORMATION:	SUPPLEMENTAL INFORMATION:
SUPPLEMENTAL INFORMATION:
SUPPLEMENTAL INFORMATION:
Interest paid, net of amounts capitalized	Interest paid, net of amounts capitalized	$	99,425	$	76,141	$	131,264	$	113,161
Income taxes paid (received), net		$	—	$	5	$	—	$	(13,524)
Interest paid, net of amounts capitalized
Interest paid, net of amounts capitalized
Income taxes paid, net
Income taxes paid, net
Income taxes paid, net

The accompanying notes are an integral part of these statements.


			11


SOUTHWEST GAS HOLDINGS, INC.						Form 10-Q
SOUTHWEST GAS CORPORATION						~~September 30, 2023~~March 31, 2024

SOUTHWEST GAS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(In thousands)

(Unaudited)


						Three Months Ended September 30,				Nine Months Ended September 30,
						2023		2022		2023		2022
					Three Months Ended March 31,										Three Months Ended March 31,
					2024									2024		2023
Common stock shares	Common stock shares
		Beginning and ending balances				47,482		47,482		47,482		47,482
		Beginning and ending balances
		Beginning and ending balances
		Beginning and ending balances
Common stock amount	Common stock amount
		Beginning and ending balances				$	49,112	$	49,112	$	49,112	$	49,112
		Beginning and ending balances
		Beginning and ending balances
		Beginning and ending balances
Additional paid-in capital	Additional paid-in capital
		Beginning balances				2,156,026		1,622,006		1,622,969		1,618,911
				Share-based compensation		1,248		614		4,305		3,709
				Contributions from Southwest Gas Holdings, Inc.		—		—		530,000		—
		Ending balances				2,157,274		1,622,620		2,157,274		1,622,620
		Beginning balances
		Beginning balances
		Beginning balances
			Share-based compensation
	Ending balances
Accumulated other comprehensive loss	Accumulated other comprehensive loss
		Beginning balances				(37,868)		(44,247)		(38,261)		(46,913)
				Net actuarial gain arising during period, less amortization of unamortized benefit plan cost, net of tax		196		1,126		589		3,376
				FSIRS amounts reclassified to net income, net of tax		—		—		—		416
		Ending balances				(37,672)		(43,121)		(37,672)		(43,121)
		Beginning balances
		Beginning balances
		Beginning balances
			Net actuarial gain arising during period, less amortization of unamortized benefit plan cost, net of tax
	Ending balances
Retained earnings	Retained earnings
		Beginning balances				1,009,608		952,725		935,355		906,827
				Net income (loss)		(3,251)		(22,199)		150,565		87,330
				Share-based compensation		(75)		(98)		(438)		(729)
				Dividends declared to Southwest Gas Holdings, Inc.		(39,700)		(30,000)		(118,900)		(93,000)
		Ending balances				966,582		900,428		966,582		900,428
		Beginning balances
		Beginning balances
		Beginning balances
			Net income
			Share-based compensation
			Dividends declared to Southwest Gas Holdings, Inc.
	Ending balances
Total Southwest Gas Corporation equity ending balances	Total Southwest Gas Corporation equity ending balances					$	3,135,296	$	2,529,039	$	3,135,296	$	2,529,039

The accompanying notes are an integral part of these statements.


			12


SOUTHWEST GAS HOLDINGS, INC.						Form 10-Q
SOUTHWEST GAS CORPORATION						~~September 30, 2023~~March 31, 2024

Note 1 – Background, Organization, and Summary of Significant Accounting Policies

Nature of Operations. Southwest Gas Holdings, Inc. (together with its subsidiaries, the “Company”) is a holding company, owning all of the shares of common stock of Southwest Gas Corporation (“Southwest” or the “natural gas distribution” segment), and through the first quarter of 2024, all of the shares of common stock of Centuri Group, Inc. (“~~Centuri,” or the “utility~~utility infrastructure services” segment), and until February 14, 2023, all of the shares of common stock of MountainWest Pipelines Holding Company (“MountainWest” or the “pipeline and storage” segment). References throughout this document in reference to “Centuri” relate to Centuri Group, Inc., for earlier periods or more recently, to Centuri Holdings, Inc.

In December 2022, the Company announced that its Board of Directors (the “Board”) unanimously determined to take strategic actions to simplify the Company’s portfolio of businesses. These actions included entering into a definitive agreement to sell 100% of MountainWest to Williams Partners Operating LLC (“Williams”) for $1.5 billion in total enterprise value, subject to certain adjustments (collectively, the “MountainWest sale”). The MountainWest sale closed on February 14, 2023.

As part of this simplification strategy, the Company previously communicated that it would pursue a separation of Centuri. In April 2024, the Company announced the completion of an initial public offering (“IPO”) of Centuri Holdings, Inc. common stock, with the issuance of 14,260,000 shares ($0.01 par value) at $21.00 per share, along with a private placement of 2,591,929 shares at the same public offering price with Icahn Partners LP and ~~has~~Icahn Partners Master Fund LP, investment entities associated with Carl C. Icahn. The Company owns approximately 81% of Centuri following these events. Through the first quarter of 2024 and leading up to the IPO, Centuri continued to ~~undertake significant efforts toward a near-term separation, including submitting a confidential draft registration statement on Form S-1~~be wholly owned by Southwest Gas Holdings, Inc. Centuri continues to be consolidated as part of these financial statements, and will continue to be consolidated until such time as the ~~U.S.~~conditions for consolidation are no longer met. Centuri now makes separate filings with the Securities and Exchange Commission (the “SEC”) as a public company. The Company’s common stock continues to trade under the ticker symbol “SWX,” while Centuri’s common stock trades under the ticker symbol “CTRI.” As part of the IPO and related undertakings, and to ultimately facilitate a full separation of Centuri over periods ahead, multiple agreements were executed between the Company and Centuri, including a Separation Agreement, a Tax Matters Agreement, and a Registration Rights Agreement. Centuri’s new Board of Directors includes certain overlapping board members with the Company, including Andrew W. Evans, Anne L. Mariucci, and Karen S. Haller (the Company’s Chief Executive Officer). See also Note 8 - Dispositions~~for more information.~~.

Southwest is engaged in the business of purchasing, distributing, and transporting natural gas for customers in portions of Arizona, Nevada, and California. Public utility rates, practices, facilities, and service territories of Southwest are subject to regulatory oversight. The timing and amount of rate relief can materially impact results of operations. Natural gas purchases and the timing of related recoveries can materially impact ~~liquidity. Results~~liquidity, highlighted by the significant amount of cash existing as of the end of the first quarter of 2024, reflective of the collection of gas cost under purchased gas cost mechanisms as a component of customer bills. While mechanisms exist in all states in which Southwest operates, which effectively and primarily decouple authorized operating cost recovery and profitability from the volume of natural gas sold, thereby also incentivizing energy conservation, results for the natural gas distribution segment are higher during winter periods due to the seasonality incorporated in its regulatory rate structures.

Centuri is a strategic utility infrastructure services company dedicated to partnering with North America’s gas and electric providers to build and maintain the energy network that powers millions of homes across the United States (“U.S.”) and Canada. Centuri derives revenue primarily from installation, replacement, repair, and maintenance of energy networks. Centuri operates in the U.S., primarily as NPL, Neuco, Linetec, and Riggs Distler, and in Canada, primarily as NPL Canada. Utility infrastructure services activity is seasonal in many of Centuri’s operating areas. Peak periods are the summer and fall 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.

Basis of Presentation. The condensed consolidated financial statements of Southwest Gas Holdings, Inc. and subsidiaries and Southwest (with its subsidiaries) included herein have been prepared pursuant to the rules and regulations of the SEC. The year-end ~~2022~~2023 condensed balance sheet data was derived from audited financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. No substantive change has occurred with regard to the Company’s business segments on the whole during the recently completed quarter.

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


			13


SOUTHWEST GAS HOLDINGS, INC.						Form 10-Q
SOUTHWEST GAS CORPORATION						March 31, 2024

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto of Southwest and the Company included in ~~the 2022 Annual Report to Stockholders, which is incorporated by reference into Southwest’s and the Company’s 2022~~our 2023 Annual Report on Form ~~10-K.~~10-K for the fiscal year ended December 31, 2023.

In the first quarter of 2023, management identified a misstatement related to its accounting for the cost of gas sold at Southwest, thereby determining that Net cost of gas sold was overstated in 2021 and 2022 by $2.3 million and $5.7 million, respectively. Southwest made an adjustment in the first quarter of 2023 to reduce Net cost of gas sold and to increase its asset balance for Deferred purchased gas cost by $8 million.

Also in the first quarter of 2023, the Company identified an approximately $21 million misstatement related to its initial estimation of the loss recorded upon reclassifying MountainWest as an asset held for sale during the year ended December 31, 2022. Consequently, the impairment loss for the year ended December 31, 2022 was understated by approximately $21 million, which was corrected in the first quarter of 2023.

The Company (and Southwest, with respect to Net cost of gas sold) assessed, both quantitatively and qualitatively, the impact of these items on previously issued financial statements, concluding they were not material to any ~~prior~~earlier period or to the ~~current~~ period ~~financial statements.~~


			13


~~SOUTHWEST GAS HOLDINGS, INC.~~						~~Form 10-Q~~
~~SOUTHWEST GAS CORPORATION~~						~~September 30, 2023~~

of correction.

Other Property and Investments. Other property and investments on Southwest’s and the Company’s Condensed Consolidated Balance Sheets includes:


(Thousands of dollars)	(Thousands of dollars)	September 30, 2023		December 31, 2022		(Thousands of dollars)	March 31, 2024	December 31, 2023
Net cash surrender value of COLI policies	Net cash surrender value of COLI policies	$	141,321	$	136,245
Other property	Other property	6,140		33,152
Total Southwest Gas Corporation	Total Southwest Gas Corporation	147,461		169,397
Non-regulated property, equipment, and intangibles	Non-regulated property, equipment, and intangibles	1,748,625		1,677,218
Non-regulated accumulated provision for depreciation and amortization	Non-regulated accumulated provision for depreciation and amortization	(677,442)		(596,518)
Other property and investments	Other property and investments	35,421		31,075
Total Southwest Gas Holdings, Inc.	Total Southwest Gas Holdings, Inc.	$	1,254,065	$	1,281,172

Held for sale. In the first quarter of 2023, the Company and Southwest concluded certain assets associated with ~~its~~their previous corporate headquarters met the criteria to be classified as held for sale. As a result, the Company and Southwest reclassified approximately $27 million from Other property and investments to Current assets held for sale on their respective Condensed Consolidated Balance Sheets in the first quarter of 2023. In ~~September~~ 2023, the Company and Southwest recorded an estimated loss of ~~$2.1~~$5.2 million on the assets based upon an updated fair value less costs to ~~sell, which is recorded~~sell. The sale was completed in ~~Other income (deductions).~~January 2024.

Cash and Cash Equivalents. Cash and cash equivalents of the Company include $~~67.7~~407.4 million and ~~$30~~$48.9 million of money market fund investments at ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, respectively. ~~The money market fund investments for Southwest were $66~~Of these amounts, $407.2 million and $38.6 million at ~~September 30, 2023~~March 31, 2024 and ~~$17.6 million at~~ December 31, ~~2022~~2023, respectively, ~~respectively.~~were held by Southwest. Refer to discussion above regarding recent collections under Southwest’s purchased gas adjustment mechanisms.

Noncash investing activities include capital expenditures that were not yet paid, thereby remaining in accounts payable, ~~the~~ amounts related to which declined by approximately ~~$39.6~~$20.8 million and ~~$35.2~~$9.6 million during the ~~nine~~three months ended ~~September 30,~~March 31, 2024, for the Company and Southwest, respectively; and declined approximately $37.3 million and $34.2 million during the three months ended March 31, 2023, for the Company and Southwest, ~~respectively, and decreased $10.5 million and $2.9 million for each of these entities during the twelve months ended September 30, 2023.~~respectively.

The ~~Other change~~Company and Southwest expanded their presentation in the first quarter 2024 to show the Change in short-term portion of credit facility and Repayment of short-term debt as ~~presented on the Company’s and Southwest’s~~separate line items within their Condensed Consolidated Statements of Cash ~~Flows is comprised of repayments of short-term debt and changes in the current portion of the credit facility.~~

~~Deferred purchased gas costs.~~ ~~In July 2023, the Arizona Corporation Commission approved an increase in the gas cost balancing account (“GCBA”) rate, over a two-year~~Flows. The comparable prior-year period ~~as an enhancement~~has been updated to the existing gas cost recovery mechanism, given the $358 million Arizona account balance existing as of May 31, 2023. The increased GCBA rate of $0.20 per therm will support timely recovery of the existing balance. Based on the design of base tariff gas cost rates in Arizona and surcharges, the account balance existing as of that date is deemed generally recoverable over the next twelve months, and is therefore classified as a current asset on the balance sheets of the Company and Southwest.reflect this change.

Prepaid and other current assets. Prepaid and other current assets for the Company and Southwest include, among other things, materials and operating supplies of ~~$86.6~~$80.9 million at ~~September 30, 2023~~March 31, 2024 and ~~$77.3~~$83.4 million at December 31, ~~2022~~2023 (carried at weighted average cost). ~~Also included in the balance was $207 million as of December 31, 2022 in unrecovered purchased gas costs, with~~ no ~~corresponding asset balance as of September 30, 2023.~~

Goodwill. Goodwill is assessed as of October 1 each year for impairment, or more frequently, if circumstances indicate an impairment to the carrying value of goodwill may have occurred. The Company’s reporting units for goodwill are its operating segments, which are also its reportable segments. Since December 31, ~~2022,~~2023, management qualitatively assessed whether events during the first ~~nine~~three months of ~~2023~~2024 indicated it was more likely than not that the fair value of our reporting units was less than their carrying value, which if the case, could be an indication of a goodwill impairment. Through management’s assessments, no impairment was deemed to have occurred in the continuing segments of the Company. Goodwill in the Natural Gas


			14


SOUTHWEST GAS HOLDINGS, INC.						Form 10-Q
SOUTHWEST GAS CORPORATION						March 31, 2024

Distribution and Utility Infrastructure Services segments is included in the respective Condensed Consolidated Balance Sheets as follows:


(Thousands of dollars)	(Thousands of dollars)	Natural Gas Distribution		Utility Infrastructure Services		Total Company		(Thousands of dollars)	Natural Gas Distribution	Utility Infrastructure Services	Total Company
December 31, 2022		$	11,155	$	776,095	$	787,250
December 31, 2023
Foreign currency translation adjustment	Foreign currency translation adjustment	—		183		183
September 30, 2023		$	11,155	$	776,278	$	787,433
March 31, 2024

Other Current Liabilities. Management recognizes in its balance sheets various liabilities that are expected to be settled through future cash payment within the next twelve months, including amounts payable under regulatory mechanisms, customary accrued expenses for employee compensation and benefits, declared but unpaid dividends, and miscellaneous other


			14


~~SOUTHWEST GAS HOLDINGS, INC.~~						~~Form 10-Q~~
~~SOUTHWEST GAS CORPORATION~~						~~September 30, 2023~~

accrued liabilities. Other current liabilities for the Company include ~~$44.3 million~~ ~~and $41.6~~$44.4 million of dividends declared as of ~~September 30, 2023~~both March 31, 2024 and December 31, ~~2022,~~2023, respectively. Also included in the balance for the Company and Southwest was ~~$36.6~~$120.3 million and ~~$7.5~~$87.6 million ~~related to a regulatory liability associated with the Arizona decoupling mechanism as of September 30, 2023 and December 31, 2022, respectively, as well as~~ ~~$41.5 million~~ ~~as of September 30, 2023~~ in accrued purchased gas cost ~~with no corresponding liability balance~~ as of March 31, 2024 and December 31, ~~2022.~~2023, respectively.

Other Income (Deductions). The following table provides the composition of significant items included in Other income (deductions) in Southwest’s and the Company’s Condensed Consolidated Statements of Income:


		Three Months Ended September 30,				Nine Months Ended September 30,				Twelve Months Ended September 30,
		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,
(Thousands of dollars)
(Thousands of dollars)
(Thousands of dollars)	(Thousands of dollars)	2023		2022		2023		2022		2023		2022
Southwest Gas Corporation:	Southwest Gas Corporation:
Southwest Gas Corporation:
Southwest Gas Corporation:
Change in COLI policies
Change in COLI policies
Change in COLI policies	Change in COLI policies	$	(1,500)	$	(1,500)	$	4,800	$	(8,700)	$	8,100	$	(5,700)
Interest income	Interest income	13,249		4,356		40,235		10,355		46,063		12,156
Interest income
Interest income
Equity AFUDC
Equity AFUDC
Equity AFUDC	Equity AFUDC	—		91		—		248		(248)		248
Other components of net periodic benefit cost	Other components of net periodic benefit cost	5,097		(188)		15,290		(563)		15,102		(4,068)
Other components of net periodic benefit cost
Other components of net periodic benefit cost
Miscellaneous expense
Miscellaneous expense
Miscellaneous expense	Miscellaneous expense	(2,309)		(1,081)		(8,603)		(1,780)		(23,739)		(2,733)
Southwest Gas Corporation - total other income (deductions)	Southwest Gas Corporation - total other income (deductions)	14,537		1,678		51,722		(440)		45,278		(97)
Centuri and Southwest Gas Holdings, Inc.:
Southwest Gas Corporation - total other income (deductions)
Southwest Gas Corporation - total other income (deductions)
Centuri, MountainWest, and Southwest Gas Holdings, Inc.:
Centuri, MountainWest, and Southwest Gas Holdings, Inc.:
Centuri, MountainWest, and Southwest Gas Holdings, Inc.:

Foreign transaction gain (loss)

Foreign transaction gain (loss)

Foreign transaction gain (loss)	Foreign transaction gain (loss)	18		(182)		(399)		35		543		32
Equity AFUDC	Equity AFUDC	—		246		82		664		(117)		664
Equity in earnings of unconsolidated investments		142		624		591		1,867		1,353		1,925
Equity AFUDC
Equity AFUDC
Equity in earnings (loss) of unconsolidated investments
Equity in earnings (loss) of unconsolidated investments
Equity in earnings (loss) of unconsolidated investments
Miscellaneous income and (expense)
Miscellaneous income and (expense)
Miscellaneous income and (expense)	Miscellaneous income and (expense)	(50)		(523)		466		(1,746)		(901)		(1,661)
Corporate and administrative	Corporate and administrative	(183)		(250)		66		(378)		181		(385)
Corporate and administrative
Corporate and administrative
Southwest Gas Holdings, Inc. - total other income (deductions)	Southwest Gas Holdings, Inc. - total other income (deductions)	$	14,464	$	1,593	$	52,528	$	2	$	46,337	$	478
Southwest Gas Holdings, Inc. - total other income (deductions)
Southwest Gas Holdings, Inc. - total other income (deductions)

Interest income primarily relates to Southwest’s regulatory asset balances, including its deferred purchased gas cost mechanisms, the combined balance of which ~~increased~~ranged from ~~$381~~$970 million as of ~~September 30, 2022~~March 31, 2023 to ~~$687~~$199 million as of ~~September 30, 2023.~~March 31, 2024. Refer also to Note 2 – Components of Net Periodic Benefit Cost. Miscellaneous expense for Southwest includes a variety of items, including reserves for uncompleted software projects and held-for-sale assets (discussed above) at Southwest deemed non-recoverable from its utility operations.

Redeemable Noncontrolling ~~Interests.~~Interests. In connection with the acquisition of Linetec in November 2018, the previous owner initially retained a 20% equity interest in that entity, with redemption being subject to certain rights based on the passage of time or upon the occurrence of certain triggering events. Effective in 2022, the Company, through Centuri, had the right, but not the obligation, to purchase at fair value (subject to a floor) a portion of the interest held by the previous owner, and in incremental amounts each year thereafter. In March 2022, the parties agreed to a partial redemption, reducing the noncontrolling interest to 15%, and in March 2023, ~~agreeing once again~~agreed to a partial 5% redemption (of the 15% then remaining). Then again in April 2023, Centuri paid $39.9 million to the previous owner, ~~in April 2023,~~ thereby reducing the balance continuing to be redeemable ~~as of September 30, 2023~~at that time to 10% under the terms of the original agreement. In March 2024, the parties entered into an agreement ~~with~~to redeem the remaining 10% equity interest for $92 million, which resulted in Centuri ~~now~~ owning ~~a 90% stake~~all of the equity interest in Linetec. as of March 31, 2024. The Company paid the $92 million in April, in accordance with the agreement. The impact of this transaction has been excluded from the Company’s Condensed Consolidated Statement of Cash Flows for the first quarter of 2024 due to its noncash nature during the period.

~~Furthermore,~~Separately, certain members of Riggs Distler management have a ~~1.42%~~1.41% interest in Drum, which is redeemable, subject to certain rights based on the passage of time or upon the occurrence of certain triggering events. A portion of the redeemable noncontrolling interest was funded through promissory notes made to noncontrolling interest holders bearing interest at the prime rate plus 2%.


			15


SOUTHWEST GAS HOLDINGS, INC.						Form 10-Q
SOUTHWEST GAS CORPORATION						March 31, 2024

During the first quarter of 2024, Centuri forgave all outstanding promissory notes and unpaid interest owed from the Riggs Distler noncontrolling interest holders and in exchange obtained 0.47% portion of the equity interest in Drum that had been funded through these notes. This comprises most of the change noted below as redemption of Drum interests during the quarter. Additionally, during the first quarter of 2024, Centuri reached an agreement to purchase 0.13% of the noncontrolling interest in Drum for $0.8 million, the majority which was accrued in March 2024 and ultimately paid in April 2024. The impact of the accrued amount has been excluded from the Company’s Condensed Consolidated Statement of Cash Flows for the first quarter of 2024 due to the noncash nature in advance of the April 2024 payment. The remaining noncontrolling interest in Drum outstanding as of March 31, 2024 was 0.81%, with Centuri owning over 99% of Drum following these events.

Significant changes in the value of the redeemable noncontrolling interests, above a floor determined at the establishment date, are recognized as they occur, and the carrying value is adjusted as necessary at each reporting date. The fair value is estimated using a market approach that utilizes certain financial metrics from guideline public companies of similar industry and operating characteristics. ~~Based on the fair value model employed, the estimated redemption value of the Linetec redeemable noncontrolling interest increased approximately~~ ~~$21.8 million~~ during the nine months ended September 30, 2023 (notwithstanding the change resulting from the partial redemption noted above), and the estimated redemption value of the Drum redeemable noncontrolling interest did not change from the balance at December 31, 2022. Valuation adjustments also


			15


~~SOUTHWEST GAS HOLDINGS, INC.~~						~~Form 10-Q~~
~~SOUTHWEST GAS CORPORATION~~						~~September 30, 2023~~

impact retained earnings, as reflected in the Company’s Condensed Consolidated Statement of Equity, but do not impact net income. The following depicts changes to the balances of the redeemable noncontrolling interests:


(Thousands of dollars):	(Thousands of dollars):	Linetec		Drum		Total		(Thousands of dollars):	Linetec	Drum	Total
Balance, December 31, 2022		$	146,765	$	12,584	$	159,349
Net income attributable to redeemable noncontrolling interests		3,714		142		3,856
Balance, December 31, 2023
Net income (loss ) attributable to redeemable noncontrolling interests
Redemption value adjustments	Redemption value adjustments	21,846		—		21,846
Redemption of equity interest from noncontrolling party	Redemption of equity interest from noncontrolling party	(39,894)		—		(39,894)
Balance, September 30, 2023		$	132,431	$	12,726	$	145,157
Balance, March 31, 2024

Earnings Per Share. Basic earnings per share (“EPS”) in each period of this report were calculated by dividing net income attributable to Southwest Gas Holdings, Inc. by the weighted-average number of shares during those periods. Diluted EPS includes additional weighted-average common stock equivalents (performance shares and restricted stock units). Unless otherwise noted, the term “Earnings Per Share” refers to Basic EPS. A reconciliation of the denominator used in Basic and Diluted EPS calculations is shown in the following table:


		Three Months Ended September 30,		Nine Months Ended September 30,		Twelve Months Ended September 30,
		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,
(In thousands)
(In thousands)
(In thousands)	(In thousands)	2023	2022	2023	2022	2023	2022
Weighted average basic shares	Weighted average basic shares	71,626	67,157	70,488	65,004	69,660	63,905
Weighted average basic shares
Weighted average basic shares
Effect of dilutive securities:	Effect of dilutive securities:
Restricted stock units (1)(2)		225	—	188	144	—	146
Effect of dilutive securities:
Effect of dilutive securities:
Restricted stock units (1)
Restricted stock units (1)
Restricted stock units (1)
Weighted average diluted shares	Weighted average diluted shares	71,851	67,157	70,676	65,148	69,660	64,051
Weighted average diluted shares
Weighted average diluted shares

(1) The number of ~~anti-dilutive restricted stock units excluded from the calculation of diluted shares during the three months ended September 30, 2022 is 168,000,~~securities included 136,000 and ~~192,000~~132,000 ~~during the twelve months ended September 30, 2023.~~

~~(2) The number of securities included 189,000~~ performance shares during the three months ended ~~September 30,~~March 31, 2024 and March 31, 2023, ~~160,000 and 135,000 performance shares during the nine months ending September 30, 2023 and 2022, and 135,000 performance shares during the twelve months ended September 30, 2022,~~ the total of which was derived by assuming that target performance will be achieved during the relevant performance period.

Income Taxes. The Company’s effective tax rate was ~~(47.1)%~~16.3% for the three months ended ~~September 30, 2023,~~March 31, 2024, compared to ~~11.9%~~37.6% for the corresponding period in ~~2022~~2023. The effective rate decrease was primarily due to pre-tax income differences and the amortization of excess deferred income taxes. The Company’s effective tax rate was 28.2% for the nine months ended September 30, 2023, compared to 18.6% for the corresponding period in 2022 primarily due to amortization of excess deferred income taxes, company-owned life insurance (“COLI”), which is non-taxable and non-deductible, and the MountainWest sale ~~and~~in 2023, which also ~~includes~~included the impact of book versus tax basis differences related to the transaction (See Note 8 - Dispositions).

Southwest’s effective tax rate was ~~65.3%~~18.2% for the three months ended ~~September 30, 2023,~~March 31, 2024, compared to ~~28.1%~~18.3% for the corresponding period in ~~2022~~2023. These amounts varied from the statutory rate primarily ~~due to pre-tax income differences,~~as the result of the amortization of excess deferred income ~~taxes, and corporate-owned life insurance. Southwest’s effective tax rate was 12.9% for the nine months ended September 30, 2023, compared to 17.0% in the corresponding period in 2022, primarily~~ ~~due to the amortization of excess accumulated deferred income taxes and corporate-owned life insurance.~~taxes.

In April 2023, the Internal Revenue Service ~~(“IRS”)~~ issued Revenue Procedure 2023-15, which provides a safe harbor method of accounting that taxpayers may use to determine whether expenditures to repair, maintain, replace, or improve natural gas transmission and distribution property must be capitalized for tax purposes. The Company and Southwest are currently reviewing this revenue procedure to determine the potential impact on their financial position, results of operations, and cash flows.

~~Recent Accounting Standards Updates.~~

~~There are no recently issued accounting standards updates that are expected to be adopted or material to Southwest or the Company effective in 2023 or thereafter.~~


			16


SOUTHWEST GAS HOLDINGS, INC.						Form 10-Q
SOUTHWEST GAS CORPORATION						~~September 30, 2023~~March 31, 2024

Recent Accounting Standards Updates.

Recently issued accounting pronouncement that will be effective in 2024 and later periods:

In November 2023, the Financial Accounting Standards Board (the “FASB”) issued ASU 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” The update, among other amendments, requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss, as well as an amount and description of the composition of other segment items to reconcile to segment profit or loss, and also requires the title and position of the entity’s CODM to be disclosed. The update additionally extends certain annual disclosures to interim periods. The provisions of the update are effective for fiscal years beginning after December 15, 2023 and interim periods within the fiscal years beginning after December 15, 2024. Early adoption is permitted. Management is evaluating the impacts this update might have on the Company’s and Southwest’s disclosures.

Recently issued accounting pronouncement that will be effective after 2024:

In December 2023, the FASB issued ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The update, among other amendments, provides for enhanced income tax information primarily through changes in the rate reconciliation and income taxes paid. The update is effective for annual periods beginning after December 15, 2024; early adoption is permitted. Management is evaluating the impacts this update might have on the Company’s and Southwest’s disclosures.


			17


SOUTHWEST GAS HOLDINGS, INC.						Form 10-Q
SOUTHWEST GAS CORPORATION						March 31, 2024

Note 2 – Components of Net Periodic Benefit Cost

Southwest has a noncontributory qualified retirement plan with defined benefits covering substantially all employees (those hired before 2022) and a separate unfunded supplemental retirement plan (“SERP”), which is limited to officers hired before 2022. Southwest also provides limited postretirement benefits other than pensions (“PBOP”) to its qualified retirees for health care, dental, and life insurance.

The service cost component of net periodic benefit costs included in the table below is a component of an overhead loading process associated with the cost of labor. The overhead process ultimately results in allocation of service cost to the same accounts to which productive labor is charged. As a result, service costs become components of various accounts, primarily operations and maintenance expense, net regulated operations plant, and deferred charges and other assets for both the Company and Southwest. The other components of net periodic benefit cost are reflected in Other income (deductions) on the Condensed Consolidated Statements of Income of each entity. Variability in total net periodic benefit cost between periods, especially with regard to the Qualified Retirement Plan, is subject to changes in underlying actuarial assumptions between periods, notably the discount rate.










		Qualified Retirement Plan
		September 30,
		Three Months				Nine Months				Twelve Months
		2023		2022		2023		2022		2023		2022
(Thousands of dollars)	(Thousands of dollars)
(Thousands of dollars)
(Thousands of dollars)
Service cost
Service cost
Service cost	Service cost	$	6,460	$	11,028	$	19,380	$	33,084	$	30,406	$	43,374
Interest cost	Interest cost	14,791		11,251		44,373		33,753		55,626		43,861
Interest cost
Interest cost
Expected return on plan assets
Expected return on plan assets
Expected return on plan assets	Expected return on plan assets	(21,015)		(19,978)		(63,045)		(59,934)		(83,024)		(78,022)
Amortization of net actuarial loss	Amortization of net actuarial loss	84		8,117		252		24,351		8,369		34,839
Amortization of net actuarial loss
Amortization of net actuarial loss
Net periodic benefit cost
Net periodic benefit cost
Net periodic benefit cost	Net periodic benefit cost	$	320	$	10,418	$	960	$	31,254	$	11,377	$	44,052

		SERP
		September 30,
		Three Months				Nine Months				Twelve Months
		2023		2022		2023		2022		2023		2022










(Thousands of dollars)
(Thousands of dollars)
(Thousands of dollars)	(Thousands of dollars)
Service cost	Service cost	$	62	$	106	$	186	$	318	$	292	$	450
Service cost
Service cost
Interest cost
Interest cost
Interest cost	Interest cost	531		360		1,593		1,080		1,954		1,437
Amortization of net actuarial loss	Amortization of net actuarial loss	249		588		748		1,763		1,335		2,424
Amortization of net actuarial loss
Amortization of net actuarial loss
Net periodic benefit cost
Net periodic benefit cost
Net periodic benefit cost	Net periodic benefit cost	$	842	$	1,054	$	2,527	$	3,161	$	3,581	$	4,311

		PBOP
		September 30,
		Three Months				Nine Months				Twelve Months
		2023		2022		2023		2022		2023		2022










(Thousands of dollars)
(Thousands of dollars)
(Thousands of dollars)	(Thousands of dollars)
Service cost	Service cost	$	317	$	485	$	951	$	1,455	$	1,437	$	1,877
Service cost
Service cost
Interest cost
Interest cost
Interest cost	Interest cost	825		613		2,475		1,839		3,088		2,387
Expected return on plan assets	Expected return on plan assets	(606)		(807)		(1,818)		(2,421)		(2,625)		(3,230)
Expected return on plan assets
Expected return on plan assets
Amortization of prior service costs
Amortization of prior service costs
Amortization of prior service costs	Amortization of prior service costs	44		44		132		132		175		372

Net periodic benefit cost	Net periodic benefit cost	$	580	$	335	$	1,740	$	1,005	$	2,075	$	1,406

Net periodic benefit cost

Net periodic benefit cost


			18


SOUTHWEST GAS HOLDINGS, INC.						Form 10-Q
SOUTHWEST GAS CORPORATION						March 31, 2024

Note 3 – Revenue

The following information about the Company’s revenues is presented by segment. Southwest encompasses the natural gas distribution segment and Centuri encompasses the utility infrastructure services segment.


			17


~~SOUTHWEST GAS HOLDINGS, INC.~~						~~Form 10-Q~~
~~SOUTHWEST GAS CORPORATION~~						~~September 30, 2023~~

Natural Gas Distribution Segment:

Southwest’s operating revenues included on the Condensed Consolidated Statements of Income of both the Company and Southwest include revenue from contracts with customers, which is shown below, disaggregated by customer type, in addition to other categories of revenue:




		Three Months Ended September 30,				Nine Months Ended September 30,				Twelve Months Ended September 30,
(Thousands of dollars)	(Thousands of dollars)	2023		2022		2023		2022		2023		2022
(Thousands of dollars)
(Thousands of dollars)
Residential
Residential
Residential	Residential	$	215,376	$	170,196	$	1,277,363	$	913,355	$	1,688,802	$	1,205,176
Small commercial	Small commercial	85,955		61,780		366,667		264,494		480,693		348,934
Small commercial
Small commercial
Large commercial
Large commercial
Large commercial	Large commercial	27,888		19,590		84,021		60,740		108,515		78,081
Industrial/other	Industrial/other	16,596		13,319		52,165		34,064		68,995		46,025
Industrial/other
Industrial/other
Transportation
Transportation
Transportation	Transportation	23,278		22,936		77,558		74,034		104,166		98,057
Revenue from contracts with customers	Revenue from contracts with customers	369,093		287,821		1,857,774		1,346,687		2,451,171		1,776,273
Revenue from contracts with customers
Revenue from contracts with customers
Alternative revenue program revenues (deferrals)
Alternative revenue program revenues (deferrals)
Alternative revenue program revenues (deferrals)	Alternative revenue program revenues (deferrals)	21,840		13,609		(72,251)		1,132		(91,861)		19,648
Other revenues (1)	Other revenues (1)	3,670		2,514		11,825		10,606		14,682		13,718
Other revenues (1)
Other revenues (1)
Total Regulated operations revenues	Total Regulated operations revenues	$	394,603	$	303,944	$	1,797,348	$	1,358,425	$	2,373,992	$	1,809,639
Total Regulated operations revenues
Total Regulated operations revenues

(1) Amounts include late fees and other miscellaneous revenues, and may also include the impact of certain regulatory mechanisms.

Utility Infrastructure Services Segment:

During the fourth quarter of 2023, Utility infrastructure services segment management, in connection with Centuri’s planned separation, changed its service type revenue classification to align with changes in its organizational structure, and as a result, prior year “other” revenue has been recast into gas infrastructure services or electric power infrastructure services to reflect these changes, with no impact to revenue overall. The following tables display Centuri’s revenue, reflected as Utility infrastructure services revenues on the Condensed Consolidated Statements of Income of the Company, representing revenue from contracts with customers disaggregated by service and contract types:




		Three Months Ended September 30,				Nine Months Ended September 30,				Twelve Months Ended September 30,
(Thousands of dollars)	(Thousands of dollars)	2023		2022		2023		2022		2023		2022
(Thousands of dollars)
(Thousands of dollars)
Service Types:
Service Types:
Service Types:	Service Types:
Gas infrastructure services	Gas infrastructure services	$	443,083	$	467,751	$	1,173,960	$	1,147,302	$	1,558,476	$	1,487,806
Gas infrastructure services
Gas infrastructure services
Electric power infrastructure services
Electric power infrastructure services
Electric power infrastructure services	Electric power infrastructure services	200,547		189,209		668,681		550,926		895,879		729,067
Other	Other	131,259		101,506		391,320		290,205		551,500		404,773
Other
Other
Total Utility infrastructure services revenues	Total Utility infrastructure services revenues	$	774,889	$	758,466	$	2,233,961	$	1,988,433	$	3,005,855	$	2,621,646
Total Utility infrastructure services revenues
Total Utility infrastructure services revenues

Three Months Ended
September 30, Nine Months Ended
September 30, Twelve Months Ended September 30,
(Thousands of dollars) 2023 2022 2023 2022 2023 2022
Contract Types:
Master services agreement $ 631,913 $ 637,582 $ 1,830,242 $ 1,700,416 $ 2,472,046 $ 2,193,195
Bid contract 142,976 120,884 403,719 288,017 533,809 428,451
Total Utility infrastructure services revenues $ 774,889 $ 758,466 $ 2,233,961 $ 1,988,433 $ 3,005,855 $ 2,621,646
Unit price contracts $ 440,787 $ 453,718 $ 1,191,889 $ 1,178,168 $ 1,621,852 $ 1,544,471
Fixed price contracts 165,637 117,983 521,722 333,313 686,448 451,374
Time and materials contracts 168,465 186,765 520,350 476,952 697,555 625,801
Total Utility infrastructure services revenues $ 774,889 $ 758,466 $ 2,233,961 $ 1,988,433 $ 3,005,855 $ 2,621,646
*The three months ended March 31, 2023 were previously presented as: Gas infrastructure services of $297,408, Electric power infrastructure services of $233,640, and Other of $122,245.


			19


SOUTHWEST GAS HOLDINGS, INC.						Form 10-Q
SOUTHWEST GAS CORPORATION						March 31, 2024


	Three Months Ended March 31,
(Thousands of dollars)	2024		2023
Contract Types:
Master services agreement	$	443,242	$	547,606
Bid contract	84,781		105,687
Total Utility infrastructure services revenues	$	528,023	$	653,293

Unit price contracts	$	307,849	$	328,527
Fixed price contracts	110,282		166,915
Time and materials contracts	109,892		157,851
Total Utility infrastructure services revenues	$	528,023	$	653,293

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


			18


~~SOUTHWEST GAS HOLDINGS, INC.~~						~~Form 10-Q~~
~~SOUTHWEST GAS CORPORATION~~						~~September 30, 2023~~

excess of revenue earned on contracts (contract liabilities) at Centuri, which are included in Other current liabilities as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022~~2023 on the Company’s Condensed Consolidated Balance Sheets:

(Thousands of dollars)

September 30, 2023

December 31, 2022

(Thousands of dollars)

March 31, 2024

December 31, 2023

Contracts receivable, net

452,728

394,022

Revenue earned on contracts in progress in excess of billings

282,759

238,059

Amounts billed in excess of revenue earned on contracts

51,710

35,769

~~The revenue~~Revenue earned on contracts in progress in excess of billings (contract assets) that are not expected to be recognized within a year from the financial statement date are not included in the table above, and were $16.5 million as of March 31, 2024, and $0.2 million as of December 31, 2023. These non-current balances were included in Deferred charges and other assets on the Company’s Condensed Consolidated Balance Sheets.

These contract assets primarily ~~relates~~relate to Centuri’s ~~right~~rights to consideration for work completed, but not billed and/or approved for billing at the ~~reporting date. These contract assets~~reporting date, and are transferred to contracts receivable when the rights become unconditional. ~~Contract assets increased $44.7 million during 2023 due primarily to continued revenue growth.~~ The amounts billed in excess of revenue earned primarily relate to the ~~advance~~advance consideration received from customers for which work has not yet been completed. The ~~change~~decrease in ~~this~~the contract liability balance from December 31, ~~2022~~2023 to ~~September 30, 2023 increased $15.9~~March 31, 2024 of $30 million was due ~~to amounts received for services not yet performed,~~to revenue recognized during the period, net of ~~revenue recognized.~~new payments received in advance of work performed.

For contracts that have an original duration of one year or less, Centuri uses the practical expedient applicable to such contracts and does not consider/compute an interest component based on the time value of money. Furthermore, because of the short 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.

As of ~~September 30, 2023,~~March 31, 2024, Centuri had 5753 fi ~~fixed~~xed price contracts with an original duration of more than one year. The aggregate amount of the transaction price allocated to the unsatisfied performance obligations of these contracts as of ~~September 30, 2023~~March 31, 2024 was $~~383 million~~277 million. C~~. Centuri~~enturi expects to recognize the remaining performance obligations over approximately the next two years; however, the timing of that recognition is largely within the control of the customer, including when the necessary materials required to complete the work are provided by the customer.

Utility infrastructure services contracts receivable consists of the following:


(Thousands of dollars)	(Thousands of dollars)	September 30, 2023		December 31, 2022		(Thousands of dollars)	March 31, 2024	December 31, 2023
Billed on completed contracts and contracts in progress	Billed on completed contracts and contracts in progress	$	453,434	$	395,771
Other receivables	Other receivables	3,906		2,569
Contracts receivable, gross	Contracts receivable, gross	457,340		398,340
Allowance for doubtful accounts	Allowance for doubtful accounts	(4,612)		(4,318)
Contracts receivable, net	Contracts receivable, net	$	452,728	$	394,022


			20


SOUTHWEST GAS HOLDINGS, INC.						Form 10-Q
SOUTHWEST GAS CORPORATION						March 31, 2024

Note 4 – Common Stock

Shares of the Company’s common stock are publicly traded on the New York Stock Exchange, under the ticker symbol “SWX.” Share-based compensation related to Southwest and Centuri (for award grants prior to 2024 that continue to be subject to time-based vesting) is based on stock awards to be issued in shares of Southwest Gas Holdings, Inc.

~~On April 8, 2021, the Company entered into a Sales Agency Agreement between~~In November 2023, the Company and ~~BNY Mellon Capital Markets, LLC and J.P. Morgan Securities LLC (the “Equity Shelf Program”) for the offer and sale of up to $500 million of common stock from time to time in~~Southwest jointly filed an ~~at-the-market offering program. The shares are issued pursuant to the Company’s~~ automatic shelf registration statement ~~on Form S-3~~ (File No. ~~333-251074)~~333-275774), ~~or “the Universal Shelf.” There~~which became effective upon filing. The prior shelf registration expired in December 2023. Upon expiration of the prior shelf registration, the Company’s equity shelf program was noterminated. The Company intends to enter into a~~ctivity~~ ~~under~~ similar program during 2024.

During the ~~Equity Shelf Program~~three months ended March 31, 2024, the Company issued approximately 67,000 shares of common stock through the Omnibus Incentive Plan.

Additionally, during the ~~quarter~~three months ended ~~September 30, 2023. The following table provides the life-to-date activity under that program through September 30, 2023:~~




~~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~~

~~As of September 30, 2023,~~March 31, 2024, the Company ~~had approximately $342 million in~~issued 35,000 shares of common stock ~~available for issuance under~~through the ~~program.~~Dividend Reinvestment and Stock Purchase Plan, raising approximately $2.4 million.


			1921


SOUTHWEST GAS HOLDINGS, INC.						Form 10-Q
SOUTHWEST GAS CORPORATION						~~September 30, 2023~~

In March 2023, the Company issued, through a separate prospectus supplement under the Universal Shelf, an aggregate of 4.1 million shares of common stock, at an underwritten public offering price of $60.12 per share, resulting in net proceeds to the Company of $238.4 million, net of an underwriter’s discount of $8.3 million and estimated expenses of the offering. Approximately $140 million (2.3 million shares) of the offering was purchased by certain funds affiliated with Carl C. Icahn, a significant stockholder beneficially owning more than 15% of the outstanding stock of the Company as of September 30, 2023. The Company used the net proceeds to repay outstanding amounts under the Company’s credit facility, with the remaining proceeds used to pay off residual amounts outstanding under the loan entered into in November 2021 in connection with the acquisition of MountainWest and the remainder, for working capital and general corporate purposes.

~~During the nine months ended September 30, 2023, the Company issued approximately~~ ~~61,000~~ ~~shares of common stock through the Restricted Stock/Unit Plan and Omnibus Incentive Plan.~~

~~Additionally, during the nine months ended September 30, 2023, the Company issued~~ ~~222,000~~ ~~shares of common stock through the Dividend Reinvestment and Stock Purchase Plan, raising approximately~~ ~~$12.7 million~~.


			20


~~SOUTHWEST GAS HOLDINGS, INC.~~						~~Form 10-Q~~
~~SOUTHWEST GAS CORPORATION~~						~~September 30, 2023~~March 31, 2024

Note 5 – Debt

Long-Term Debt

Long-term debt is recognized in the Company’s and Southwest’s Condensed Consolidated Balance Sheets generally at the carrying value of the obligations outstanding. Details surrounding the fair value and individual carrying values of instruments are provided in the table that follows.


			September 30, 2023				December 31, 2022				March 31, 2024		December 31, 2023
			Carrying Amount		Fair Value		Carrying Amount		Fair Value
		Carrying Amount										Carrying Amount		Fair Value	Carrying Amount	Fair Value
(Thousands of dollars)	(Thousands of dollars)
Southwest Gas Corporation:	Southwest Gas Corporation:
Southwest Gas Corporation:
Southwest Gas Corporation:
Debentures:	Debentures:
Debentures:
Debentures:
8% Series, due 2026
8% Series, due 2026
8% Series, due 2026	8% Series, due 2026		$	75,000	$	77,489	$	75,000	$	80,027
Medium-term notes, 7.92% series, due 2027	Medium-term notes, 7.92% series, due 2027		25,000		26,063		25,000		26,840
Medium-term notes, 6.76% series, due 2027	Medium-term notes, 6.76% series, due 2027		7,500		7,533		7,500		7,662
Notes, 5.8%, due 2027	Notes, 5.8%, due 2027		300,000		300,300		300,000		305,913
Notes, 3.7%, due 2028	Notes, 3.7%, due 2028		300,000		274,884		300,000		275,043
Notes, 5.45%, due 2028	Notes, 5.45%, due 2028		300,000		295,212		—		—
Notes, 2.2%, due 2030	Notes, 2.2%, due 2030		450,000		353,831		450,000		353,763
Notes, 4.05%, due 2032	Notes, 4.05%, due 2032		600,000		518,934		600,000		527,052
Notes, 6.1%, due 2041	Notes, 6.1%, due 2041		125,000		113,156		125,000		113,184
Notes, 4.875%, due 2043	Notes, 4.875%, due 2043		250,000		193,110		250,000		195,703
Notes, 3.8%, due 2046	Notes, 3.8%, due 2046		300,000		203,553		300,000		209,169
Notes, 4.15%, due 2049	Notes, 4.15%, due 2049		300,000		210,048		300,000		218,712
Notes, 3.18%, due 2051	Notes, 3.18%, due 2051		300,000		172,647		300,000		185,523
Unamortized discount and debt issuance costs	Unamortized discount and debt issuance costs		(30,357)				(29,471)
			3,302,143				3,003,029
			3,303,672
			3,303,672
			3,303,672
Revolving credit facility and commercial paper
Revolving credit facility and commercial paper
Revolving credit facility and commercial paper	Revolving credit facility and commercial paper		—		—		50,000		50,000
Industrial development revenue bonds:	Industrial development revenue bonds:
Tax-exempt Series A, due 2028
Tax-exempt Series A, due 2028
Tax-exempt Series A, due 2028	Tax-exempt Series A, due 2028		50,000		50,000		50,000		50,000
2003 Series A, due 2038	2003 Series A, due 2038		50,000		50,000		50,000		50,000
2008 Series A, due 2038	2008 Series A, due 2038		50,000		50,000		50,000		50,000
2009 Series A, due 2039	2009 Series A, due 2039		50,000		50,000		50,000		50,000
Unamortized discount and debt issuance costs	Unamortized discount and debt issuance costs		(1,459)				(1,733)
			198,541				198,267
			198,739
			198,739
			198,739
Less: current maturities
Less: current maturities
Less: current maturities	Less: current maturities		—				—
Southwest Gas Corporation total long-term debt, less current maturities	Southwest Gas Corporation total long-term debt, less current maturities		3,500,684				3,251,296
Southwest Gas Corporation total long-term debt, less current maturities
Southwest Gas Corporation total long-term debt, less current maturities
Southwest Gas Holdings, Inc.:	Southwest Gas Holdings, Inc.:
SWH term loan facility			550,000		550,000		—		—
Southwest Gas Holdings, Inc.:
Southwest Gas Holdings, Inc.:

Centuri secured term loan facility

Centuri secured term loan facility

Centuri secured term loan facility	Centuri secured term loan facility		997,100		994,607		1,008,550		995,852
Centuri secured revolving credit facility	Centuri secured revolving credit facility		143,881		143,918		81,955		82,315
Other debt obligations	Other debt obligations		104,240		97,261		126,844		118,314
Unamortized discount and debt issuance costs	Unamortized discount and debt issuance costs		(18,031)				(20,789)
Less: current maturities	Less: current maturities		(42,335)				(44,557)
Less: current maturities
Less: current maturities
Southwest Gas Holdings, Inc. total long-term debt, less current maturities	Southwest Gas Holdings, Inc. total long-term debt, less current maturities		$	5,235,539			$	4,403,299
Southwest Gas Holdings, Inc. total long-term debt, less current maturities
Southwest Gas Holdings, Inc. total long-term debt, less current maturities


			2122


SOUTHWEST GAS HOLDINGS, INC.						Form 10-Q
SOUTHWEST GAS CORPORATION						~~September 30, 2023~~March 31, 2024

Southwest has a $400 million credit facility that is scheduled to expire in April 2025. Southwest designates $150 million of associated capacity as long-term debt and the remaining $250 million for working capital purposes. Interest rates for the credit facility are calculated at either the Secured Overnight Financing Rate (“SOFR”) or an “alternate base rate,” plus in each case an applicable margin that is determined based on Southwest’s senior unsecured debt rating. At ~~September 30, 2023,~~March 31, 2024, the applicable margin isis 1.125% for loans bearing interest with reference to SOFR and 0.125% for loans bearing interest with reference to the alternative base rate. At ~~September 30, 2023,~~March 31, 2024, no borrowings were outstanding on the long-term portion (including under the commercial paper program), nor under the short-term portion of the facility.

Centuri has a $1.545 billion secured revolving credit and term loan multi-currency facility. Amounts can be borrowed in either Canadian or U.S. dollars. The revolving credit facility matures on August 27, 2026 and the term loan facility matures on August 27, 2028. Interest rates for the revolving credit facility and term loan facility are based on either a “base rate,” SOFR or the Canadian Dollar Offered Rate (“CDOR”), plus an applicable margin. The capacity of the line of credit portion of the facility is $400 million; related amounts borrowed and repaid are available to be re-borrowed. The term loan portion of the facility has a limit of $1.145 billion. The obligations under the credit agreement are secured by present and future ownership interests in substantially all direct and indirect subsidiaries of Centuri, substantially all of the tangible and intangible personal property of each borrower, certain of their direct and indirect subsidiaries, and all products, profits, and proceeds of the foregoing. Centuri’s assets securing the facility at ~~September 30, 2023~~March 31, 2024 totaled $~~2.6~~2.4 billion. At ~~September 30, 2023, $1.141~~March 31, 2024, $1.1 billion in borrowings were outstanding under Centuri’s combined secured revolving credit and term loan facility.

On March 22, 2024, Centuri amended the financial covenants of its revolving credit facility to increase the maximum total net leverage ratio for the fiscal quarter ending March 31, 2024 to a ratio of 5.75 to 1.00, for the fiscal quarter ending June 30, 2024 to a ratio of 6.00 to 1.00, and for the fiscal quarter ending September 30, 2024 to a ratio of 5.75 to 1.00. In addition, this amendment increased the adjusted maximum total net leverage ratio financial covenants, which are applicable in the event that a “Qualified IPO” (as defined in the amendment) is consummated, for each of the fiscal quarters ending March ~~2023, Southwest issued $300~~31, 2024, June 30, 2024, and September 30, 2024. The terms of the Centuri credit facility otherwise remain unchanged. Following the IPO and private placement, Centuri used approximately $316 million ~~aggregate principal amount~~ of ~~5.450% Senior Notes (the “March 2023 Notes”). The notes will mature in March 2028. Southwest used the net~~ proceeds to ~~repay amounts outstanding~~pay down $156 million of debt under ~~its~~the existing line of credit and $160 million of debt under the term loan portion of the facility, ~~and~~with the remainder intended for general corporate purposes.

~~In April 2023,~~ ~~Southwest Gas Holdings, Inc.~~ entered into a $550 million Term Loan Credit Agreement (the “Term Loan”) that matures in October 2024. Interest rates for the Term Loan are calculated, at the Company’s option, at either SOFR plus an adjustment of 0.100% or the “alternate base rate,” plus in each case an applicable margin. Loans bearing interest with reference to SOFR have an applicable margin of 1.300% and loans bearing interest with reference to the alternate base rate have an applicable margin of 0.300%. SOFR is calculated with a floor of 0.000% and alternative base rate is calculated with a floor of 1.000%. Southwest Gas Holdings, Inc. utilized a majority of the proceeds to make an equity contribution to Southwest. On April 17, 2023, Southwest utilized the equity contribution to repay, in full, amounts outstanding under its then existing ~~$450 million~~ ~~364-day term loan, with the remainder of the equity contribution used for working capital and general corporate purposes.~~

Short-Term Debt

Southwest Gas Holdings, Inc. has a $300 million credit facility that is scheduled to expire in December 2026 and is primarily used for short-term financing needs. Interest rates for the credit facility are calculated at either SOFR or the “alternate base rate,” plus in each case an applicable margin. There was ~~$57.5~~$94 million outstanding under this credit facility as of ~~September 30, 2023.~~March 31, 2024.

In April 2023, Southwest Gas Holdings, Inc. entered into a $550 million Term Loan Credit Agreement (the “Term Loan”) that matures in October 2024. Southwest Gas Holdings, Inc. utilized a majority of the proceeds to make an equity contribution to Southwest.

As indicated above, under Southwest’s $400 million credit facility, no short-term borrowings were outstanding at ~~September 30, 2023.~~March 31, 2024.

Note 6 – Other Comprehensive Income and Accumulated Other Comprehensive Income

The following information presents the Company’s Other comprehensive income (loss), both before and after-tax impacts, within the Condensed Consolidated Statements of Comprehensive Income, which also impact Accumulated other comprehensive income (“AOCI”) in the Condensed Consolidated Balance Sheets and the Condensed Consolidated Statements of Equity.


			2223


SOUTHWEST GAS HOLDINGS, INC.						Form 10-Q
SOUTHWEST GAS CORPORATION						~~September 30, 2023~~March 31, 2024

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

Three Months Ended
September 30, 2023 Three Months Ended
September 30, 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 $ (10) $ 34
Amortization of net actuarial (gain)/loss 333 (80) 253 8,705 (2,089) 6,616
Regulatory adjustment (118) 28 (90) (7,268) 1,744 (5,524)
Total other comprehensive income (loss) - Southwest Gas Corporation 259 (63) 196 1,481 (355) 1,126
Foreign currency translation adjustments:
Translation adjustments (2,261) — (2,261) (5,830) — (5,830)
Foreign currency other comprehensive income (loss) (2,261) — (2,261) (5,830) — (5,830)
Total other comprehensive income (loss) - Southwest Gas Holdings, Inc. $ (2,002) $ (63) $ (2,065) $ (4,349) $ (355) $ (4,704)
Nine Months Ended
September 30, 2023 Nine Months Ended
September 30, 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 $ 132 $ (33) $ 99 $ 132 $ (32) $ 100
Amortization of net actuarial (gain)/loss 1,000 (240) 760 26,114 (6,267) 19,847
Regulatory adjustment (356) 86 (270) (21,804) 5,233 (16,571)
Pension plans other comprehensive income (loss) 776 (187) 589 4,442 (1,066) 3,376
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 776 (187) 589 4,987 (1,195) 3,792
Foreign currency translation adjustments:
Translation adjustments 130 — 130 (7,263) — (7,263)
Foreign currency other comprehensive income (loss) 130 — 130 (7,263) — (7,263)
Total other comprehensive income (loss) - Southwest Gas Holdings, Inc. $ 906 $ (187) $ 719 $ (2,276) $ (1,195) $ (3,471)


			23


~~SOUTHWEST GAS HOLDINGS, INC.~~						~~Form 10-Q~~
~~SOUTHWEST GAS CORPORATION~~						~~September 30, 2023~~

Twelve Months Ended
September 30, 2023 Twelve Months Ended
September 30, 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 (43) 132 372 (90) 282
Amortization of net actuarial (gain)/loss 9,704 (2,330) 7,374 37,263 (8,942) 28,321
Regulatory adjustment (6,784) 1,628 (5,156) (81,273) 19,506 (61,767)
Pension plans other comprehensive income (loss) 7,174 (1,725) 5,449 15,538 (3,728) 11,810
FSIRS (designated hedging activities):
Amounts reclassified into net income — — — 1,087 (259) 828
FSIRS other comprehensive income (loss) — — — 1,087 (259) 828
Total other comprehensive income (loss) - Southwest Gas Corporation 7,174 (1,725) 5,449 16,625 (3,987) 12,638
Foreign currency translation adjustments:
Translation adjustments 1,260 — 1,260 (6,919) — (6,919)
Foreign currency other comprehensive income (loss) 1,260 — 1,260 (6,919) — (6,919)
Total other comprehensive income (loss) - Southwest Gas Holdings, Inc. $ 8,434 $ (1,725) $ 6,709 $ 9,706 $ (3,987) $ 5,719


	Three Months Ended March 31, 2024						Three Months Ended March 31, 2023
(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	1,910		(459)		1,451		333		(80)		253
Regulatory adjustment	(1,448)		348		(1,100)		(119)		29		(90)
Total other comprehensive income (loss) - Southwest Gas Corporation	506		(122)		384		258		(62)		196
Foreign currency translation adjustment	(2,819)		—		(2,819)		97		—		97

Total other comprehensive income (loss) - Southwest Gas Holdings, Inc.	$	(2,313)	$	(122)	$	(2,435)	$	355	$	(62)	$	293

(1)Tax amounts are calculated using a 24% rate. The Company has elected to indefinitely reinvest, in Canada, the earnings of Centuri’s Canadian subsidiaries, thus precluding deferred taxes on such earnings. As a result of this assertion, and no repatriation of earnings anticipated, the Company is not recognizing a tax effect or presenting a tax expense or benefit for currency translation adjustments reported in Other comprehensive income (loss).

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




		Defined Benefit Plans						Foreign Currency Items							Defined Benefit Plans							Foreign Currency Items
(Thousands of dollars)	(Thousands of dollars)	Before-Tax		Tax (Expense) Benefit (3)		After-Tax			Before-Tax		Tax (Expense) Benefit		After-Tax			AOCI		(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		—		—		—			130		—		130			130
Beginning Balance AOCI December 31, 2023
Foreign currency translation adjustment
Amortization of prior service cost (1)	Amortization of prior service cost (1)	132		(33)		99			—		—		—			99
Amortization of net actuarial loss (1)	Amortization of net actuarial loss (1)	1,000		(240)		760			—		—		—			760
Regulatory adjustment (2)	Regulatory adjustment (2)	(356)		86		(270)			—		—		—			(270)
Net current period other comprehensive income (loss) attributable to Southwest Gas Holdings, Inc.	Net current period other comprehensive income (loss) attributable to Southwest Gas Holdings, Inc.	776		(187)		589			130		—		130			719
Ending Balance AOCI September 30, 2023		$	(49,566)	$	11,894	$	(37,672)		$	(5,851)	$	—	$	(5,851)		$	(43,523)
Ending Balance AOCI March 31, 2024

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

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

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


			24


~~SOUTHWEST GAS HOLDINGS, INC.~~						~~Form 10-Q~~
~~SOUTHWEST GAS CORPORATION~~						~~September 30, 2023~~

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


		Defined Benefit Plans							Defined Benefit Plans
(Thousands of dollars)	(Thousands of dollars)	Before-Tax		Tax (Expense) Benefit (6)		After-Tax		(Thousands of dollars)	Before-Tax	Tax (Expense) Benefit (6)	After-Tax
Beginning Balance AOCI December 31, 2022		$	(50,342)	$	12,081	$	(38,261)
Beginning Balance AOCI December 31, 2023
Amortization of prior service cost (4)	Amortization of prior service cost (4)	132		(33)		99
Amortization of net actuarial loss (4)	Amortization of net actuarial loss (4)	1,000		(240)		760
Regulatory adjustment (5)	Regulatory adjustment (5)	(356)		86		(270)
Net current period other comprehensive income attributable to Southwest Gas Corporation	Net current period other comprehensive income attributable to Southwest Gas Corporation	776		(187)		589
Ending Balance AOCI September 30, 2023		$	(49,566)	$	11,894	$	(37,672)
Ending Balance AOCI March 31, 2024

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

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

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


			24


SOUTHWEST GAS HOLDINGS, INC.						Form 10-Q
SOUTHWEST GAS CORPORATION						March 31, 2024

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

(Thousands of dollars) September 30, 2023 December 31, 2022
Net actuarial loss $ (359,113) $ (360,113)
Prior service cost (1,221) (1,353)
Less: amount recognized in regulatory assets 310,768 311,124
Recognized in AOCI $ (49,566) $ (50,342)


			25


(Thousands of dollars)	March 31, 2024		December 31, 2023
Net actuarial loss	$	(360,058)	$	(361,968)
Prior service cost	(1,134)		(1,178)
Less: amount recognized in regulatory assets	308,346		309,794
Recognized in AOCI	$	(52,846)	$	(53,352)

Note 7 – Segment Information

The Company has two reportable segments. Southwest comprises the natural gas distribution segment and Centuri comprises the utility infrastructure services segment. As a result of the MountainWest sale in February 2023 (previously comprising the pipeline and storage segment), the information for the ~~nine and twelve~~three months ended ~~September 30,~~March 31, 2023 presented below for MountainWest reflects activity from January 1, 2023 through February 13, 2023 (the last full day of its ownership by the Company).

Centuri accounts for services provided to Southwest at contractual prices. Accounts receivable for these services, which are not eliminated during consolidation, are presented in the table below:

(Thousands of dollars)

September 30, 2023

December 31, 2022

(Thousands of dollars)

March 31, 2024

December 31, 2023

Centuri accounts receivable for services provided to Southwest

11,764

18,067

In order to reconcile the table below to net income (loss) as disclosed in the Condensed Consolidated Statements of Income, an Other column is included associated with impacts of corporate and administrative activities related to Southwest Gas Holdings, Inc. The financial information pertaining to the natural gas distribution, utility infrastructure services, and pipeline and storage segments are as follows:

(Thousands of dollars) Natural Gas
Distribution Utility Infrastructure
Services Pipeline and Storage Other Total
Three Months Ended September 30, 2023
Revenues from external customers $ 394,603 $ 745,639 $ — $ — $ 1,140,242
Intersegment revenues — 29,250 — — 29,250
Total $ 394,603 $ 774,889 $ — $ — $ 1,169,492
Segment net income (loss) $ (3,251) $ 17,956 $ — $ (11,474) $ 3,231
Three Months Ended September 30, 2022
Revenues from external customers $ 303,944 $ 721,910 $ 63,178 $ — $ 1,089,032
Intersegment revenues — 36,556 — — 36,556
Total $ 303,944 $ 758,466 $ 63,178 $ — $ 1,125,588
Segment net income (loss) $ (22,199) $ 14,345 $ 12,320 $ (16,775) $ (12,309)

(Thousands of dollars) Natural Gas
Distribution Utility Infrastructure
Services Pipeline and Storage Other Total
Nine Months Ended September 30, 2023
Revenues from external customers $ 1,797,348 $ 2,145,601 $ 35,132 $ — $ 3,978,081
Intersegment revenues — 88,360 — — 88,360
Total $ 1,797,348 $ 2,233,961 $ 35,132 $ — $ 4,066,441
Segment net income (loss) $ 150,565 $ 24,902 $ (16,288) $ (81,159) $ 78,020
Nine Months Ended September 30, 2022
Revenues from external customers $ 1,358,425 $ 1,889,573 $ 192,259 $ — $ 3,440,257
Intersegment revenues — 98,860 — — 98,860
Total $ 1,358,425 $ 1,988,433 $ 192,259 $ — $ 3,539,117
Segment net income (loss) $ 87,330 $ (4,400) $ 44,326 $ (49,962) $ 77,294


			26


(Thousands of dollars)	(Thousands of dollars)	Natural Gas Distribution		Utility Infrastructure Services		Pipeline and Storage		Other		Total		(Thousands of dollars)	Natural Gas Distribution	Utility Infrastructure Services	Pipeline and Storage	Other	Total
Twelve Months Ended September 30, 2023
Three Months Ended March 31, 2024
Revenues from external customers
Revenues from external customers
Revenues from external customers	Revenues from external customers	$	2,373,992	$	2,881,697	$	107,486	$	—	$	5,363,175
Intersegment revenues	Intersegment revenues	—		124,158		—		—		124,158
Total	Total	$	2,373,992	$	3,005,855	$	107,486	$	—	$	5,487,333
Segment net income (loss)	Segment net income (loss)	$	217,615	$	31,367	$	(344,347)	$	(107,199)	$	(202,564)

Twelve Months Ended September 30, 2022
Three Months Ended March 31, 2023
Three Months Ended March 31, 2023
Three Months Ended March 31, 2023
Revenues from external customers
Revenues from external customers
Revenues from external customers	Revenues from external customers	$	1,809,639	$	2,495,169	$	192,259	$	—	$	4,497,067
Intersegment revenues	Intersegment revenues	—		126,477		—		—		126,477
Total	Total	$	1,809,639	$	2,621,646	$	192,259	$	—	$	4,623,544
Segment net income (loss)	Segment net income (loss)	$	171,881	$	3,223	$	44,326	$	(72,193)	$	147,237

The corporate and administrative activities for Southwest Gas Holdings, Inc. in the three months ending ~~September 30, 2023~~March 31, 2024 include approximately ~~$10~~$11 million of interest expense, including amounts incurred under the $550 million Term Loan entered into in April 2023, along with $3$2.7 million in costs associated with the planned separation of Centuri, offset by tax benefits experienced during the quarter.

The nine-month and twelve-month periods ended September 30, 2023 incrementally include, among other things, additional amounts related to the sale agreement with Williams in regard to MountainWest, including a charge of $28.4 million from the post-closing rate case settlement agreement for MountainWest Overthrust Pipeline; and an additional $21 million reflecting the final post-closing payment of $7.4 million related to cash and net working capital balances above/below a contract benchmark, with the remaining charge associated with other changes in the assets and liabilities that were not subject to post-closing payment true-up provisions. The post-closing payment of $7.4 million returned approximately the same amount initially paid by Williams to the Company at closing. Other corporate and administrative amounts during the year-to-date period also reflect residual costs associated with or as a result of the MountainWest sale, as well as $32 million of interest expense, including amounts noted above in the third quarter of 2023 and amounts under the loan entered into by Southwest Gas Holdings, Inc. in November 2021 in connection with the acquisition of MountainWest prior to it being paid in full in March 2023 (including $2.5 million in debt issuance costs written off when the debt was repaid). The twelve-month period ended September 30, 2023 included $52 million of interest expense including the aforementioned MountainWest acquisition loan, $7.3 million in costs associated with the planned separation of Centuri, as well as $5.7 million in combined costs associated with stockholder activism and the associated proxy contest, and costs of a strategic review initiative initiated in 2022. The amounts related to the MountainWest sale, including the rate case settlement, and post-closing adjustments, are included in Goodwill impairment and loss on sale on the Company’s Condensed Consolidated Statement of Income.

Note 8 - Dispositions

Dispositions

In December 2022, the Company announced that the Board unanimously determined to take strategic actions to simplify the Company’s portfolio of businesses. These actions included entering into a definitive agreement to sell 100% of MountainWest in an all-cash transaction to Williams for $1.5 billion in total enterprise value, subject to certain adjustments. The MountainWest sale ~~closed on~~was completed in February ~~14,~~ 2023. ~~As part of this simplification strategy,~~Additionally, the Company ~~previously communicated that~~determined it would pursue a separation of ~~Centuri. In September 2023,~~Centuri to form a new independent publicly traded utility infrastructure services company.

As discussed in Note 1 - Background, Organization, and Summary of Significant Accounting Policies, in April 2024, the Company ~~announced that~~and Centuri Holdings, Inc., a wholly owned subsidiary of the Company formed for purposes of completing the separation (“Centuri Holdings”), had confidentially submitted a draft Registration Statement on Form S-1 with the SEC for a proposed initial public offering (“IPO”) of newly issued shares of Centuri Holdings common stock. The IPO is subject to market and other conditions, announced the completion of ~~the SEC's review process, and the Board’s approval to proceed with the transaction. In the event~~ an IPO ~~is executed, the Company expects to maintain the option to either spin Centuri on~~of 12,400,000 shares of Centuri’s common stock at a tax-free or taxable basis or sell down any remaining stake in a series of taxable sell downs following the IPO once the applicable lock-up period expires. The Company will continue to evaluate options for the separation following any IPO.

The fair value of the MountainWest assets held-for-sale was previously estimated based on the preliminary closing statement and subject to certain adjustments, including a post-closing payment between the parties related to final working capital balances. The amount of the post-closing payment was finalized in May 2023. The Company recognized an additional loss on


			2725

~~sale~~price of $21.00 per share. Centuri granted the underwriters a 30-day option to purchase up to an additional 1,860,000 shares of its common stock, which was exercised. In addition, Centuri announced the concurrent private placement of an additional 2,591,929 shares at a price equal to the IPO price. Centuri’s common stock is listed on the New York Stock Exchange under the symbol “CTRI” and began trading on April 18, 2024. The net proceeds to Centuri from the IPO and the concurrent private placement, after deducting underwriting discounts and commissions of $18 million and estimated offering expenses, were approximately ~~$21 million during~~$329 million. Centuri used the ~~quarter ended March 31, 2023. This reflects the accrued post-closing payment~~proceeds to repay a portion (approximately $316 million) of ~~$7.4 million related to cash~~outstanding indebtedness under its revolving credit and ~~net working capital balances above/below a contractual benchmark,~~term loan facility, with the ~~remaining charge associated with other changes in~~remainder for general corporate purposes.

After completion of the ~~assets~~IPO, and ~~liabilities that were not subject to post-closing payment true-up provisions. The post-closing payment of $7.4 million effectively returned approximately the same amount initially paid by Williams to~~above undertakings, the Company ~~at closing.~~continues to own approximately 81.0% of all ownership interests in Centuri. The ~~$7.4 million reduced Proceeds from~~Company intends to further reduce its ownership in future periods through sales of its remaining Centuri shares into the ~~sale~~market, a distribution of ~~businesses, net~~Centuri shares to Company stockholders, or an exchange of ~~cash acquired~~Centuri shares for Southwest Gas Holdings, Inc. shares, or a combination thereof. The Company entered into several agreements with Centuri Holdings, Inc. in connection with the ~~Company’s Condensed Consolidated Statements of Cash Flows.~~

~~As referred to in~~ ~~Note 7 – Segment Information~~, in September 2022, the Federal Energy Regulatory Commission (the “FERC”) issued an order initiating an investigation, pursuant to section 5 of the Natural Gas Act, to determine whether rates charged by MountainWest Overthrust Pipeline, LLC, a subsidiary of MountainWest, were just and reasonable and setting the matter for hearing (the “Section 5 Rate Case”). In March 2023, the parties agreed to a settlement, and as a result the Company recorded an additional estimated loss of $28.4 million from the disposal of MountainWest in the first quarter of 2023, which is included in Goodwill impairment and loss on sale in the Company’s Condensed Consolidated Statement of Income. The $28.4 million was paid in the third quarter of 2023IPO and the ~~matter is now deemed closed. The $28.4 million reduced Proceeds from~~planned separation, providing a framework for the sale of businesses, net of cash sold in the Company’s Condensed Consolidated Statements of Cash Flows. Other contingent commitments were part of the agreement as well, expenses for which have been immaterial to date and are expected to continue to be immaterial overall.

~~Note 9 - Subsequent Events~~

On November 3, 2023, the Board authorized a dividend of one preferred stock purchase right (a “Right”) for each outstanding share of common stock, $1 par value per share, of the Company (the “Common Stock”). The dividend is payable on November 17, 2023 (the “Record Date”) to holders of record of Common Stock as of 5:00 P.M., New York City time, on the Record Date. The description and terms of the Rights are set forth in a Tax-Free Spin Protection Plan, dated as of November 5, 2023 (as may be amended from time to time, the “Plan”),relationship between the Company and ~~Equiniti Trust Company, LLC, as rights agent. Each Right entitles~~Centuri after the registered holder to purchase from the Company one ten-thousandth of a share of Series A Junior Participating Preferred Stock, no par value per share, of the Company (the “Series A Preferred”), at a purchase price of $300.00 per one ten-thousandth of a share of Series A Preferred, subject to adjustment.IPO.

By adopting the Plan, the Board is seeking to preserve the Company’s ability to effectuate a separation of Centuri Holdings (the “Spin-Off Transaction”) that would be tax-free to the Company (the “Tax-Free Status”). While the Company intends that any Spin-Off Transaction, if effected, would qualify as a tax-free transaction to the Company’s stockholders, the ability to effect a spin-off that is tax-free to the Company (as opposed to its stockholders) could be lost if certain stock purchases (including by existing or new holders in the open market) are treated as part of a plan pursuant to which one or more persons directly or indirectly acquire a 50% or greater interest in the Company (a “355 Ownership Change”) within applicable time periods for purposes of Section 355(e) of the Internal Revenue Code. The Company believes that there is minimal capacity for changes in the ownership of its stock before a 355 Ownership Change could occur. The Plan is intended to restrict acquisitions of Company stock that could cause a 355 Ownership Change and could impair the Company’s ability to effectuate a Spin-Off Transaction that has Tax-Free Status. The Board believes it is in the best interest of the Company and its stockholders to preserve the Company’s ability to effectuate a Spin-Off Transaction with Tax-Free Status.

~~For additional information regarding the Plan, refer to our current report on Form 8-K, as filed with the SEC on November 6, 2023.~~


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

Southwest Gas Holdings, Inc. is a holding company that owns all of the shares of common stock of Southwest Gas Corporation (“Southwest” or the “natural gas distribution” segment) and through the first quarter of 2024 all of the shares of common stock of Centuri Group, Inc. ~~(“Centuri,” or the~~(the “utility infrastructure services” segment). Southwest Gas Holdings, Inc. and its subsidiaries are collectively referred to as the “Company.” References to “Centuri” relate to Centuri Group, Inc., for earlier periods, or more recently, to Centuri Holdings, Inc,

In December 2022, the Company announced that its Board of Directors (the “Board”) unanimously determined to take strategic actions to simplify the Company’s portfolio of businesses. These actions included entering into a definitive agreement to sell 100% of MountainWest in an all-cash transaction that closed on February 14, 2023. Additionally, the Company determined it would pursue a ~~spin-off~~separation of Centuri ~~(the “Centuri spin-off”),~~ to form a new independent publicly traded utility infrastructure services company.

In ~~September 2023,~~April 2024, the Company ~~announced that~~and Centuri Holdings, Inc., announced the completion of an initial public offering (“IPO”) of Centuri’s common stock, with the issuance of 14,260,000 shares ($0.01 par value) at a price of $21.00 per share, along with a concurrent private placement of 2,591,929 shares, at a price equal to the IPO price, with Icahn Partners LP and Icahn Partners Master Fund LP, investment entities associated with Carl C. Icahn. The Company owns approximately 81% of Centuri following these events. Through the first quarter of 2024 and leading up to the IPO, Centuri continued to be a wholly owned subsidiary of Southwest Gas Holdings, Inc. The net proceeds to Centuri from the IPO and the concurrent private placement totaled approximately $329 million, including optional purchase of IPO shares from underwriters. The Company ~~formed for purposes~~intends to further reduce its ownership interest in future periods through sales of ~~completing~~its remaining Centuri shares into the ~~separation~~market, a distribution of Centuri (“Centuri Holdings”), had confidentially submitted a draft registration statement on Form S-1 with the U.S. Securities and Exchange Commission (the “SEC”) for the proposed initial public offering of newly issued shares to Company stockholders, or an exchange of Centuri shares for Southwest Gas Holdings, ~~common stock. The Company remains committed to~~Inc. shares, or a combination thereof.


			28

separating Centuri and continues to assess the value of a potential tax-free spin-off of Centuri, either following, or in lieu of, a potential initial public offering by Centuri as well as other transaction alternatives. See “~~Item1A - Risk Factors” and~~ ~~Note 8 - Dispositions~~ ~~in this Quarterly Report on Form 10-Q for more information.~~

On November 3, 2023, the Board authorized a dividend of one preferred stock purchase right (a “Right”) for each outstanding share of common stock, $1 par value per share, of the Company (the “Common Stock”). The dividend is payable on November 17, 2023 (the “Record Date”) to the holders of record of Common Stock as of 5:00 P.M., New York City time, on the Record Date. The description and terms of the Rights are set forth in a Tax-Free Spin Protection Plan, dated as of November 5, 2023 (as may be amended from time to time, the “Plan”), between the Company and Equiniti Trust Company, LLC, as rights agent. See ~~Note 9 - Subsequent Events~~ ~~in this Quarterly Report on Form 10-Q for more information.~~

Our business includes Southwest, which is engaged in the business of purchasing, distributing, and transporting natural gas for customers in portions of Arizona, Nevada, and California. Southwest is the largest distributor of natural gas in Arizona and Nevada, and also distributes and transports natural gas for customers in portions of California. Additionally, through its subsidiaries, Southwest operates two regulated interstate pipelines serving portions of ~~Southwest’s service territories.~~Nevada and California. Southwest makes investments in infrastructure to support customer demand associated with population growth and economic development activity and the safe and reliable operation of its system through adherence to integrity management programs.

As of ~~September 30, 2023,~~March 31, 2024, Southwest ha~~d 2,211,000~~ had 2,235,000 residential, commercial, industrial, and other natural gas customers, of which ~~1,184,000~~1,197,000 customers were located in Arizona, ~~822,000~~832,000 in Nevada, and ~~205,000~~206,000 in California. Over the past twelve months, first-time meter sets were approximately ~~41,000,~~40,000, compared to ~~40,000~~42,000 for the twelve months ended ~~September 2022.~~March 2023. ~~Residential~~Residential and small commercial customers represented over 99% of thethe total customer base. During the twelve months ended ~~September 30, 2023,~~March 31, 2024, 54% of operating margin (Regulated operations revenues less the net cost of gas sold) was earned in Arizona, ~~34%~~33% in Nevada, and ~~12%~~13% in ~~California.~~California. During this same period, ~~Southwest earned 84%~~Southwest earned 86% of its operating margin from residential and small commercial customers, 5%4% from other sales customers, and ~~11% fr~~10% fromom transportation customers. These patterns are expected to remain materially consistent for the foreseeable future.

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

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


			27

customers, and resulting revenue and margin, are included as part of mechanisms that reduce the impact of weather and volume variability on our earnings.

Centuri is a strategic infrastructure services company that partners with regulated utilities to build and maintain the energy network that powers millions of homes and businesses across the United States (“U.S.”) and Canada. With ~~an unwavering~~a commitment to serve as long-term partners to customers and communities, Centuri’s employees enable regulated utilities to safely and reliably deliver natural gas and electricity, as well as achieve their goals for environmental sustainability. Centuri operates in 8287 primary locations across 45 states and provinces in the U.S. and Canada. It operates in the U.S., primarily as NPL, Neuco, Linetec, and Riggs Distler, and in Canada, primarily as NPL Canada.


			29

Utility infrastructure services activity can be impacted by changes in infrastructure replacement programs of utilities, weather, and local and federal regulation (including tax rates and incentives). Utilities continue to implement or modify system integrity management programs to enhance safety pursuant to federal and state mandates. These programs have resulted in multi-year utility 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.Generally, Centuri revenues are lowest during the first quarter of the year due to less favorable winter weather conditions. Revenues typically improve as more favorable weather conditions occur during the summer and fall months. In cases of severe weather, such as following a regional storm, Centuri may be engaged to perform restoration activities related to above-ground utility infrastructure, and related results impacts are not solely within the control of management. In addition, in certain circumstances, such as with large bid contracts (especially those of a longer duration), or unit-price contracts with revenue caps, results may be impacted by differences between costs incurred and those anticipated when the work was originally bid. Work awarded, or failing to be awarded, by individual large customers can impact operating results.

All of our businesses may be impacted by economic conditions that impact businesses generally, such as inflationary impacts on goods and services consumed in the business, rising interest rates, labor markets and costs (including in regard to contracted or professional services), and the availability of those resources. Certain of these impacts may be more predominant in certain of our operations, such as with regard to fuel costs for work equipment and skilled/trade labor costs at Centuri.

This Management’s Discussion and Analysis (“MD&A”) of Financial Condition and Results of Operations should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto, as well as the MD&A included in the ~~2022~~2023 Annual Report to Stockholders, which is incorporated by reference into Southwest’s and the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2022,~~2023, in addition to the Risk Factors included in these documents, and as updated from time to time.


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Executive Summary

The items discussed in this Executive Summary are intended to provide an overview of the results of the Company’s and Southwest’s operations and are covered in greater detail in later sections of MD&A.

Summary Operating Results




		Period Ended September 30,												Period Ended March 31,
		Three Months				Nine Months				Twelve Months
(In thousands, except per share amounts)	(In thousands, except per share amounts)	2023		2022		2023		2022		2023		2022
Contribution to net income (loss)
(In thousands, except per share amounts)
(In thousands, except per share amounts)
Contribution to net income
Contribution to net income
Contribution to net income
Natural gas distribution
Natural gas distribution
Natural gas distribution	Natural gas distribution	$	(3,251)	$	(22,199)	$	150,565	$	87,330	$	217,615	$	171,881
Utility infrastructure services	Utility infrastructure services	17,956		14,345		24,902		(4,400)		31,367		3,223
Utility infrastructure services
Utility infrastructure services
Pipeline and storage
Pipeline and storage
Pipeline and storage	Pipeline and storage	—		12,320		(16,288)		44,326		(344,347)		44,326
Corporate and administrative	Corporate and administrative	(11,474)		(16,775)		(81,159)		(49,962)		(107,199)		(72,193)
Net income (loss)		$	3,231	$	(12,309)	$	78,020	$	77,294	$	(202,564)	$	147,237
Corporate and administrative
Corporate and administrative
Net income
Net income
Net income

Weighted average common shares	Weighted average common shares	71,626		67,157		70,488		65,004		69,660		63,905
Basic earnings (loss) per share

Weighted average common shares

Weighted average common shares
Basic earnings per share
Basic earnings per share
Basic earnings per share
Consolidated
Consolidated
Consolidated	Consolidated	$	0.05	$	(0.18)	$	1.11	$	1.19	$	(2.91)	$	2.30

Natural Gas Distribution	Natural Gas Distribution

Natural Gas Distribution

Natural Gas Distribution
Reconciliation of Gross Margin to Operating Margin (Non-GAAP measure)
Reconciliation of Gross Margin to Operating Margin (Non-GAAP measure)
Reconciliation of Gross Margin to Operating Margin (Non-GAAP measure)	Reconciliation of Gross Margin to Operating Margin (Non-GAAP measure)
Utility Gross Margin	Utility Gross Margin	$	80,852	$	58,021	$	443,005	$	391,540	$	623,205	$	569,675
Utility Gross Margin
Utility Gross Margin
Plus:
Plus:
Plus:	Plus:
Operations and maintenance (excluding Admin. & General) expense	Operations and maintenance (excluding Admin. & General) expense	74,427		81,092		233,302		230,235		314,137		302,924
Operations and maintenance (excluding Admin. & General) expense
Operations and maintenance (excluding Admin. & General) expense
Depreciation and amortization expense
Depreciation and amortization expense
Depreciation and amortization expense	Depreciation and amortization expense	69,268		64,390		218,763		192,434		289,372		258,144
Operating margin	Operating margin	$	224,547	$	203,503	$	895,070	$	814,209	$	1,226,714	$	1,130,743
Operating margin
Operating margin

~~3rd~~1st Quarter ~~2023~~2024 Overview

Southwest Gas Holdings highlights include the following:

•In April 2024, completed the IPO of Centuri ~~Holdings confidentially filed~~at a ~~draft Registration Statement on Form S-1~~price of $21.00 per share, along with ~~the SEC~~a concurrent private placement; net proceeds were approximately $329 million and were primarily utilized to repay amounts under Centuri’s term loan and revolving credit facility

•Corporate and administrative expenses include ~~$10~~$11 million in interest expense related to borrowings and $3$2.7 million in Centuri separation costs ~~offset by certain tax benefits~~

Natural gas distribution highlights include the following:

•~~41,000~~40,000 first-time meters sets occurred over the past 12 months

•Operating margin increased ~~$21~~ $9 million in the ~~third~~first quarter of ~~2023~~,2024, including remaining Arizona rate relief and California attrition adjustments

•In April 2024, annual revenue increase of ~$59 million was approved in Nevada, including an increase in the allowed return on equity (9.5%) and a capitalization structure reflective of 50% equity

•Filed ~~$70 million~~Arizona and Great Basin Gas Transmission Company general rate ~~case in Nevada~~cases requesting to increase revenues by approximately $126 million and $16 million, respectively

•Operations and maintenance expenses were relatively flat between comparative periods, primarily as a result of cost discipline

•$~~200~~191 million capital investment during the quarter

Utility infrastructure services highlights include the following:

•Revenues of ~~$775 million~~ ~~in the third quarter of 2023, an increase of~~ ~~$16.4 million, or 2%, compared to the third quarter of 2022~~

•~~Operating income of $53~~$528 million in the ~~third~~first quarter of ~~2023, an increase~~2024, a decrease of ~~$14~~$125.3 million, or ~~37%~~19%, compared to the ~~third~~first quarter of ~~2022~~

•~~$83 million~~2023 (which included favorable weather and more offshore wind work, as well more storm restoration ~~services revenue earned in the first nine months of 2023, an increase of $47 million over the first nine months of 2022~~

work)


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•Operating loss of $21.9 million in the first quarter of 2024, a decrease of $33.7 million, compared to the first quarter 2023 operating income

•In April 2024, paid down $316 million of debt from proceeds of the successful IPO

Results of Natural Gas Distribution

Quarterly Analysis


			Three Months Ended September 30,
		Three Months Ended March 31,								Three Months Ended March 31,
(Thousands of dollars)	(Thousands of dollars)		2023		2022		(Thousands of dollars)	2024	2023
Regulated operations revenues	Regulated operations revenues		$	394,603	$	303,944
Net cost of gas sold	Net cost of gas sold		170,056		100,441
Operating margin	Operating margin		224,547		203,503
Operations and maintenance expense	Operations and maintenance expense		122,270		121,537
Depreciation and amortization	Depreciation and amortization		69,268		64,390
Taxes other than income taxes	Taxes other than income taxes		21,147		20,693
Operating income (loss)			11,862		(3,117)
Operating income
Other income	Other income		14,537		1,678
Net interest deductions	Net interest deductions		35,772		29,417
Loss before income taxes			(9,373)		(30,856)
Income tax benefit			(6,122)		(8,657)
Income before income taxes
Income tax expense
Contribution to consolidated results	Contribution to consolidated results		$	(3,251)	$	(22,199)

Results from natural gas distribution operations improved ~~$18.9~~$1.1 million between the ~~third~~first quarters of ~~2023~~2024 and ~~2022.~~2023. The improvement was primarily due to an increase in Operating margin and ~~Other income (deductions),~~decrease in Net interest deductions, offset by ~~increases~~an increase in Depreciation and ~~amortization and Net interest deductions.~~amortization.

Operating margin increased ~~$21~~ $9.2 million ~~quarter~~quarter over quarter. Approximately $2$5 million of incremental margin was attributable to customer growth, including ~~41,000~~40,000 first-time meter sets during the last twelve months. Combined rate relief in Arizona and California added approximately ~~$14~~$10 million of ~~combined margin, nearly all of which relates to our recently concluded Arizona rate case. Additionally, a $1.8 million increase~~incremental margin. Increases in ~~recovery/return~~recoveries associated with regulatory ~~account balances~~programs of $6.5 million also contributed to the increase; an associated comparable increase is also reflected in amortization expense between ~~periods.~~periods (discussed below). Offsetting these increases was an $8 million out-of-period gas cost adjustment in the prior-year first quarter, and $4 million in higher 2024 gas cost used in operations that is offset in Operations and maintenance expense. The remaining variance primarily relates to changes in miscellaneous revenue and customers outside of the decoupling mechanism.

Operations and maintenance expense ~~increased~~ ~~$0.7~~decreased $0.3 million (less than 1%) between quarters ~~as increases~~due to the change in external contractor and professional services costs in various areas of the business, including a consulting arrangement for the identification, benchmarking, and assessment of utility business optimization opportunities, were mostly offset by decreases in other costs, including pension service cost and the cost of fuel used in ~~operations.~~operations ($4 million discussed above), which was mostly offset by increases in employee-related labor and benefit costs. Cost containment of information technology-related outside services was mostly offset by increased costs for pipeline integrity management programs. Regulatory programs/mechanisms, however, such as those in place for incremental leak survey in Nevada and uncollectible residential customer account balances in California, as well as deployment of resources to capital projects, where applicable, reduce amounts that might otherwise be reflected in expense.

Depreciation and amortization ~~expense~~ expense increased ~~$4.9~~$10.2 million, or 8%14%, ~~betwee~~nbetween quarters, ~~primarily d~~ue toreflective of a ~~$585~~$674 million,, or 6%7%, increase in average gas plant in service since the corresponding ~~third~~first quarter of ~~2022,~~2023; $6.5 million in ~~addition~~higher amortization associated with recovery of regulatory program balances substantially contributed to ~~$1.8 million of increased amortization related to regulatory account balances.~~the increase. The increase in plant was attributable to pipeline capacity reinforcement work, franchise requirements, scheduled pipe replacement activities, and new infrastructure.

Other ~~income increased~~ in~~$12.9 million~~.come decreased $0.3 million. Interest income ~~increased $8.9~~declined $2.7 million between quarters ~~related~~primarily reflecting a reduction to carrying charges associated with regulatory account balances, notably, deferred purchased gas cost balances, ~~which increased fr~~om ~~$381~~which decreased from $970 million as of ~~September 30, 2022~~ March 31, 2023 to ~~$687~~$199 million as of ~~September 30, 2023. Th~~March 31, 2024. ~~e non-service-related components~~This decrease was offset by an $1.8 million increase in the equity portion of ~~employee pension~~the allowance for funds used during construction and ~~other postretirement benefit costs decreased $5.3~~a $1.2 million increase in values underlying company-owned life insurance (“COLI”) policies between ~~quarters.~~periods.


			30

Net interest deductions ~~increased $6.4~~decreased $2.2 million in the ~~third~~first quarter of ~~2023,~~2024, as compared to the prior-year quarter, primarily due to ~~interest associated with $300~~the payoff in April 2023 of a $450 million term loan, partially offset by the impacts of ~~Senior Notes issued in December 2022 and~~ $300 million of Senior Notes issued in March 2023.


			32

~~Results of Natural Gas Distribution~~

~~Nine-Month Analysis~~

Nine Months Ended
September 30,
(Thousands of dollars) 2023 2022
Gas operating revenues $ 1,797,348 $ 1,358,425
Net cost of gas sold 902,278 544,216
Operating margin 895,070 814,209
Operations and maintenance expense 378,189 368,984
Depreciation and amortization 218,763 192,434
Taxes other than income taxes 65,491 62,443
Operating income 232,627 190,348
Other income (deductions) 51,722 (440)
Net interest deductions 111,498 84,660
Income before income taxes 172,851 105,248
Income tax expense 22,286 17,918
Contribution to consolidated results $ 150,565 $ 87,330

~~Contribution from natural gas distribution operations to consolidated net income~~ ~~increased~~ ~~$63.2 million between the first nine~~ months of 2023 and 2022. The increase was primarily due to increases in Operating margin and Other income (deductions), offset by an increase in Depreciation and amortization, Operations and maintenance, and Net interest deductions.

~~Operating margin increased~~ ~~$80.9 million, including approximately~~ ~~$10 million attributable to customer growth. Rate relief contributed an additional $42 million. Amounts related to the recovery/return associated with other regulatory programs of~~ ~~$17 million~~ ~~also contributed to the increase; such amounts also increase amortization expense. Additionally, an~~ ~~$8 million out-of-period adjusting entry was made in the first quarter of 2023, 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).~~

~~Operations and maintenance expense increased~~ ~~$9.2 million~~ (or 2%) between periods, primarily due to $5 million of increases in external contractor and professional services expenses in various areas of the business (including $3.6 million for the utility optimization initiative noted earlier), $6 million in higher direct labor charges, increases from leak survey and line locating activities ($2.6 million, combined), increased fuel used in operations ($3.2 million), and other general and employee-related costs, which were collectively offset by a decrease in the service component of postretirement benefit and legal/claim-related costs.

~~Depreciation and amortization expense increased~~ ~~$26.3 million, or 14%, between periods primarily due to the increase in regulatory account amortization, discussed above ($17 million). The remaining increase was a result of a $557 million, or 6%, incre~~ase in average gas plant in service between periods. The increase in plant was attributable to pipeline reinforcement work, franchise requirements, scheduled pipe replacement activities, and new infrastructure.

~~Other income (deductions) increased~~ ~~$52.2 million~~. Interest income increased $30 million between periods related to carrying charges associated with regulatory account balances, notably deferred purchased gas cost balances, which have increased substantially since the comparable period in the prior year. Furthermore, the non-service-related components of employee pension and other postretirement benefit costs decreased $15.9 million between periods. Southwest also recognized a $13.5 million increase in COLI policy cash surrender values and recognized death benefits in the current period compared to the comparable period in the prior year. The prior period included decreases in the investment values underlying the insurance, while the current period reflected positive returns.

Net interest deductions increased $27 million between periods primarily due to interest associated with $600 million of Senior Notes issued in March 2022, $300 million of Senior Notes issued in December 2022, and $300 million of Senior Notes issued in March 2023. Additionally, increased interest resulted from short-term debt, primarily a $450 million term loan issued in January 2023 (paid off in full in April 2023).


			33

~~Results of Natural Gas Distribution~~

~~Twelve-Month Analysis~~

Twelve Months Ended September 30,
(Thousands of dollars) 2023 2022
Regulated operations revenues $ 2,373,992 $ 1,809,639
Net cost of gas sold 1,147,278 678,896
Operating margin 1,226,714 1,130,743
Operations and maintenance expense 501,133 478,554
Depreciation and amortization 289,372 258,144
Taxes other than income taxes 86,245 82,652
Operating income 349,964 311,393
Other income (deductions) 45,278 (97)
Net interest deductions 142,718 110,957
Income before income taxes 252,524 200,339
Income tax expense 34,909 28,458
Contribution to consolidated results $ 217,615 $ 171,881

~~Contribution from natural gas distribution operations to consolidated net income increased approximately~~ ~~$46 million~~ between the twelve-month periods ended September 2023 and 2022. The increase was due primarily to increases in Operating margin and Other income (deductions), offset by an increase in Operations and maintenance expense, Depreciation and amortization, and Net interest deductions.

~~Operating margin increased $96 million between periods. Customer growth provided $14 million, and combined rate relief provided $42 million of incremental operating margin~~. Approved Vintage Steel Pipe (“VSP”) and Customer-owned Yard Line (“COYL”) revenue in Arizona also contributed to the improvement between periods ($6 million), as did recovery surcharges associated with regulatory account balances ($19 million). The $8 million out-of-period adjustment to ~~Net cost of gas sold during the first quarter of 2023 also contributed to the increase.~~

Operations and maintenance expense increased $23 million between periods. General cost increases were experienced in a variety of areas, including in direct labor charges ($8 million), external contractor and professional services in various areas of the business ($8 million), leak survey and line locating activities ($3 million), in reserves for customer accounts deemed uncollectible ($3 million), and in the cost of fuel used in operations ($5 million). These increases were partially offset by a reduction in legal and claim-related expenses.

~~Depreciation and amortization expense~~ ~~increased~~ ~~$31 million, or 12%, between periods~~ due partially to a $550 million, or 6%, increase in average gas plant in service since the corresponding period in the prior year. The increase in gas plant was attributable to pipeline capacity reinforcement work, franchise requirements, scheduled pipe replacement activities, and new infrastructure. An increase in ~~amortization of regulatory account balances of~~ ~~$19 million, as discussed in regard to Operating margin above, also contributed to the increase.~~

~~Other income increased~~ ~~$45 million~~ between the twelve-month periods of 2023 and 2022. Interest income increased $34 million between periods related to carrying charges associated with the significant increase in deferred purchased gas cost balances and interest on other regulatory account balances. Additionally, non-service-related components of employee pension and other postretirement benefit costs decreased $19.2 million between periods. Southwest also recognized a $13.8 million increase in COLI results between periods. Offsetting these impacts was $12 million related to uncompleted software projects deemed non-recoverable from utility operations, and $5 million in market adjustments on other property.

Net interest deductions increased $32 million between periods primarily due to $600 million of Senior Notes issued in March 2022, $300 million of Senior Notes issued in December 2022, and $300 million of Senior Notes issued in March 2023. Other impacts include increased interest associated with a higher amount of short-term debt and higher rates on variable-debt overall, including under Southwest’s credit facility, during the period of outstanding indebtedness.


			34

Results of Utility Infrastructure Services

Quarterly Analysis


			Three Months Ended September 30,
		Three Months Ended March 31,								Three Months Ended March 31,
(Thousands of dollars)	(Thousands of dollars)		2023		2022		(Thousands of dollars)	2024	2023
Utility infrastructure services revenues	Utility infrastructure services revenues		$	774,889	$	758,466
Operating expenses:	Operating expenses:
Utility infrastructure services expenses	Utility infrastructure services expenses		685,687		680,135
Utility infrastructure services expenses
Utility infrastructure services expenses
Depreciation and amortization	Depreciation and amortization		36,252		39,811
Operating income			52,950		38,520
Operating income (loss)
Other income (deductions)	Other income (deductions)		108		(110)
Net interest deductions	Net interest deductions		26,131		16,608
Income before income taxes			26,927		21,802
Income tax expense			8,235		6,466
Net income			18,692		15,336
Net income attributable to noncontrolling interests			736		991
Loss before income taxes
Income tax benefit
Net loss
Net income (loss) attributable to noncontrolling interests
Contribution to consolidated results	Contribution to consolidated results		$	17,956	$	14,345

Utility infrastructure services revenues ~~increased $16.4~~decreased $125.3 million, or 19%, in the ~~third~~first quarter of ~~2023~~2024 when compared to the prior-year quarter, driven primarily by decreased electric utility infrastructure services (“Electric”) revenues of $81.8 million, and decreased gas utility infrastructure services (“Gas”) revenues of $37.4 million. The decrease in Electric revenues was primarily due to a ~~$45~~decrease in emergency restoration services of $21.4 million ~~increase~~($9.2 million in the first quarter of 2024 compared to $30.6 million in the first quarter of the previous year) due to less storm activity, a decrease in offshore wind ~~revenue and an increase in electric infrastructure services revenue~~revenues of ~~$11.3~~$12.6 million ~~partially offset by a decrease in gas infrastructure services revenue (discussed below). Offshore wind revenue is reflected as a component of other revenues (refer to~~ ~~Note 3 – Revenue~~ ~~in this Quarterly Report on Form 10-Q). The increase in offshore wind revenue was offset in part by a $15.2 million decline in other revenues~~ due to timing of ~~work completed. This revenue stems from four multi-year contracts whereby Centuri provides materials, subcontracts manufacturing,~~project completion, and self-performs fabrication and assembly of secondary steel components onshore, with delivery at a port facility. The increase in electric infrastructure services revenues was due to higher volumes under certain existing customer master service agreements. Included in electric infrastructure revenue was $18.9 million from emergency restoration services following tornado and other storm damage to customers’ above-ground utility infrastructure in and around the Gulf Coast and eastern regions of the U.S., compared to $17.5 million in storm restoration work in the same quarter in the prior year. Centuri’s revenues derived from storm-related services vary from period to period due to the unpredictable nature of weather-related events, and when this type of work is performed, it typically generates a higher profit margin than core infrastructure services, due to improved operating efficiencies related to equipment utilization and absorption of fixed costs. Despite an increase in bid revenue of $24.4 million with a U.S. gas infrastructure services customer, gas infrastructure services revenue overall decreased $24.7 million during the third quarter of 2023 primarily due to a net ~~decrease~~reduction in volumes under existing ~~customer~~ master service agreements ~~primarily in Canada.~~

~~Utility infrastructure services expenses increased $5.6 million in the third quarter of 2023 when compared to the prior-year quarter, primarily~~ as a result of ~~increased costs to complete a higher volume of work~~unfavorable weather and ~~due to higher incentive compensation from improved results. General and administrative costs that are included~~customer budget constraints. The decrease in Utility infrastructure services expense overall increased $4.3 million between comparative quarters, and include incentive compensation. Subcontractor costs increased during the third quarter of 2023 compared to the prior-year quarter, in association with the higher volume of work noted, and the increasedGas revenues related to offshore wind projects. Despite continued inflationary pressures, margin on work completed in the third quarter of 2023 improved due to changes in the mix of work and lower fuel prices. Gains on sale of equipment in the third quarter of 2023 and 2022 (reflected as an offset to Utility infrastructure services expenses) were approximately ~~$1.1 million~~ ~~and $1.7 million, respectively.~~

Depreciation and amortization expense levels are contingent upon timing of equipment purchases, retirements, and replacements, and remained largely consistent as a percentage of revenue between quarters.

~~The increase in net interest deductions of~~ ~~$9.5 million~~ ~~included higher interest rates on outstanding variable-rate borrowings.~~

~~Income tax expense increased~~ ~~$1.8 million~~ ~~between quarters, primarily due to an increase in pre-tax income in 2023.~~


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~~Results of Utility Infrastructure Services~~

~~Nine-Month Analysis~~

Nine Months Ended
September 30,
(Thousands of dollars) 2023 2022
Utility infrastructure services revenues $ 2,233,961 $ 1,988,433
Operating expenses:
Utility infrastructure services expenses 2,005,084 1,829,560
Depreciation and amortization 110,982 116,286
Operating income 117,895 42,587
Other income (deductions) 311 (743)
Net interest deductions 73,032 40,337
Income (loss) before income taxes 45,174 1,507
Income tax expense (benefit) 16,416 3,350
Net income (loss) 28,758 (1,843)
Net income attributable to noncontrolling interest 3,856 2,557
Contribution to consolidated results $ 24,902 $ (4,400)

~~Utility infrastructure services revenues increased $245.5 million in the first nine months of 2023 when compared to the same period in the prior year,~~was driven primarily by ~~a $117.8 million increase in electric infrastructure revenues and a $114.3 million increase in offshore wind revenue,~~unfavorable weather, which is reflected as a component of other revenues. The increase in electric infrastructure services revenues during the first nine months of 2023 was due to growth from both new and existing customers, as well as revenues of $83.4 million in 2023 from emergency restoration services following tornado and other storm damage to customers’ above-ground utility infrastructure in and around the Gulf Coast and eastern regions of the U.S., compa~~red to $36.5 million in~~ storm restoration work during the same period in 2022. The current nine month period also includes $26.7 million of increased gas infrastructure services revenues, primarily due to increased revenue from bid work of $88.8 million with a U.S. customer, partially offset bydrove a net ~~decrease related to reduced~~reduction in volume under master services agreements with certain existing customers, ~~primarily in Canada.~~as well as timing of completion of bid projects.

Utility infrastructure services expenses ~~increased~~ ~~$175.5~~decreased $88 million, or 15%, in the first ~~nine months~~quarter of ~~2023 when~~2024 due primarily to a lower volume of infrastructure services provided. Subcontractor costs decreased during the first quarter of 2024 compared to the ~~same period in the prior year, driven~~prior-year quarter primarily ~~by the higher volume of~~due to decreased work ~~noted above. Subcontractor costs increased during the first nine months of 2023 compared to the prior year primarily in association with~~under offshore wind projects and ~~resulting revenue generation. Despite continued inflationary pressures, operating margin~~change in the mix of work performed on offshore wind projects. Profit margins in the first ~~nine months~~quarter of ~~2023 improved~~2024 decreased primarily due to inefficiencies caused by decreased volumes and unfavorable weather, changes in the mix of work, and ~~increased operating efficiencies related to~~a reduction in emergency restoration services ~~and lower fuel prices. Also included~~which typically generate higher profit margins than core infrastructure services. Included in total Utility infrastructure services expenses were general and administrative costs, which increased approximately ~~$6.7~~$5 million between ~~periods,~~quarters primarily due to ~~increased incentive compensation.~~$8.3 million in combined severance and strategic review costs in the first quarter of 2024 compared to just $0.2 million in similar costs in the first quarter of 2023. Gains on sale of equipment in the first quarter of 2024 and 2023 (reflected as an offset to Utility infrastructure services expenses) were approximately $3$0.9 million and ~~$3.7~~$0.7 million, ~~during the first nine months of 2023 and 2022,~~ respectively.

Depreciation and amortization expense ~~remained largely consistent as a percentage~~decreased $3.6 million between periods, primarily due certain tools/equipment within Electric operations becoming fully depreciated in 2023 and not requiring replacement based on project needs. Additionally, more efficient utilization of ~~revenue between periods.~~existing fixed assets in recent periods has slowed the growth of the depreciable asset base, highlighted by capital expenditures of $106.6 million in calendar year 2023 compared to $130.2 million in calendar year 2022.

The increase in net interest deductions of ~~$32.7~~$1.7 million between quarters was primarily due to higher interest rates on outstanding variable-rate ~~borrowings.~~borrowings and higher borrowings on Centuri’s revolving line of credit in the first quarter of 2024 compared to the first quarter of the prior year.

Income tax ~~expense~~benefit increased ~~$13.1~~$8.4 million ~~during the first nine months of 2023,~~between quarters, primarily due to ~~increased~~an increase in pre-tax ~~income~~loss in ~~2023.~~2024.


			3631

~~Results of Utility Infrastructure Services~~

~~Twelve-Month Analysis~~

Twelve Months Ended September 30,
(Thousands of dollars) 2023 2022
Utility infrastructure services revenues $ 3,005,855 $ 2,621,646
Operating expenses:
Utility infrastructure services expenses 2,704,842 2,403,503
Depreciation and amortization 150,049 153,947
Operating income 150,964 64,196
Other income (deductions) 167 (603)
Net interest deductions 94,066 51,825
Income before income taxes 57,065 11,768
Income tax expense 18,793 4,754
Net income 38,272 7,014
Net income attributable to noncontrolling interests 6,905 3,791
Contribution to consolidated results $ 31,367 $ 3,223

~~Utility infrastructure services revenu~~es ~~increased~~ ~~$384.2 million in~~ the current twelve-month period compared to the corresponding period of 2022, driven primarily by a $166.8 million increase in electric infrastructure revenue and a $165.2 million increase in offshore wind projects that are reflected as a component of other revenues. Included in the incremental electric infrastructure revenues during the twelve-month period of 2023 was $116.6 million from emergency restoration services following storm damage to customers’ above-ground utility infrastructure in and around the Gulf Coast and eastern regions of the U.S. and Canada, as compared to $43.9 million in similar services during the twelve-month period in 2022. The current twelve-month period also included $70.7 million of increased gas infrastructure services revenues, including increased bid revenue of $91.9 million with a U.S. customer, partially offset by a net decrease in volume under master services agreements with certain existing customers in Canada.

~~Utility infrastructure services expens~~es ~~increased~~ ~~$301.3 million between periods~~, driven primarily by a higher volume of work. Subcontractor costs increased during the current twelve-month period compared to the corresponding period of 2022 in association with offshore wind projects and related revenue generation. Despite continued inflationary pressures, operating margin improved due to changes in the mix of work and increased operating efficiencies related to emergency restoration services, lower fuel prices, as well as favorable weather conditions in certain locations between comparative twelve-month periods. Also included in total Utility infrastructure services expenses were general and administrative costs, which increased appr~~oximately $16.2 million between periods, primarily due to higher incentive compensation.~~ ~~Gains on sale of equipment (reflected as an offset to Utility infrastructure services expenses) were approximately~~ ~~$5.7 million~~ ~~and $5.3 million for the twelve-month periods of 2023 and 2022, respectively.~~

~~Depreciation and amortization expense remained largely consistent as a percentage of revenue between periods.~~

~~Net interest deductions increased~~ ~~$42.2 million between periods primarily due to higher interest rates on outstanding variable-rate borrowings.~~

~~The increase in income tax expense of~~ ~~$14 million~~ ~~between the current and prior-year twelve-month period was primarily due to increased pre-tax income.~~

Rates and Regulatory Proceedings

Southwest is subject to the regulation of the Arizona Corporation Commission (“ACC”), the Public Utilities Commission of Nevada (the “PUCN”), the California Public Utilities Commission (the “CPUC”), and two of Southwest’s subsidiaries are subject to regulation by the Federal Energy Regulatory Commission (the “FERC”).

Arizona Jurisdiction

Arizona General Rate Case. Southwest filed ~~a general~~its 2024 Arizona rate case application in ~~December 2021, primarily~~early February 2024, proposing an increase in revenue of approximately $126 million to reflect ~~in rates~~ the ~~substantial~~continued significant capital investments ~~that were made since~~in the ~~end~~state and to update rates to more closely align with Southwest’s current level of operations and maintenance expense. The request includes a return on common equity of 10.15% and a 0.81% fair value increment, relative to a 50% target equity ratio and a proposed twelve-month post-test year plant adjustment for otherwise non-revenue producing plant. In addition to proposing the continuation of full revenue decoupling under the Delivery Charge Adjustment (“DCA”) mechanism, Southwest proposed the establishment of the ~~test year in an earlier case, including investments in~~System Improvement Benefit (“SIB”) mechanism, a


			37

~~customer information system implemented in May 2021. At a hearing held in September 2022, Southwest, the ACC’s Utilities Division Staff (the “Staff”),~~ capital tracker designed to support required code and the Residential Utility Consumer Office jointly stipulated to several issues, including a target capital structure consisting of 50% equity and 50% debt; a 9.30% return on equity; and foregoing a premium related to the Graham County acquisition as well as the recovery of $12 million of waived late fees on customer account balances that would have otherwise applied to delinquent accountsregulatory-related infrastructure replacements in the ~~absence~~state of ~~a COVID-19 moratorium on~~Arizona. Southwest also proposed to set the carrying cost for the interest component of the DCA and Gas Cost Balancing Account (“GCBA”) rate adjustment mechanisms to equal the Commission-authorized Weighted Average Cost of Capital, and to establish an Unrecovered Gas Cost Expense Provision (“UGCE”), which represents the gas cost-related portion of net write-offs of uncollectible customer accounts. The UGCE would allow Southwest to more timely recover commodity and related components of such ~~fees. Approximately $12 million~~accounts. Rates, following the conclusion of the rate case, are anticipated to become effective in ~~costs related to~~ the ~~Liquefied Natural Gas facility deferred in an authorized regulatory asset was approved to be amortized over four years. The ACC’s final order authorized a $54.3 million increase, with new~~second quarter 2025. Southwest’s existing general rates became effective February 1, ~~2023.~~2023 following conclusion of the previous general rate case.

Delivery Charge Adjustment. The ~~Delivery Charge Adjustment (“DCA”) is filed~~DCA, or Arizona decoupling mechanism, as described above, includes a filing each April, which along with other reporting requirements, contemplates a rate to return/recover the over- or under-collected margin tracker (decoupling mechanism) balance. The existing rate to return the over-collected balance existing as of March 31, 2023 was approved and became effective August 1, 2023. The most recent filing was made in April ~~2023~~2024, requesting to ~~request a rate~~update rates to address the $17.5 million over-collected balance ~~of $53.5 million~~ existing as of March 31, ~~2023. The requested rate to return the over-collected balance was approved and new rates became effective August 1, 2023.~~2024.

Tax Reform. A Tax Expense Adjustor Mechanism (“TEAM”) was approved in Southwest’s 2019 general rate case to timely recognize tax rate changes resulting from federal or state tax legislation following the TEAM implementation. In addition, the TEAM tracks and returns/recovers the revenue requirement impact of changes in amortization of excess accumulated deferred income taxes (“EADIT”), including that which resulted from 2017 U.S. federal tax reform, compared to the amount authorized in the most recently concluded rate case. Following the inaugural surcredit rate establishment under the TEAM mechanism in December 2022, Southwest has filed ~~its most recent~~subsequent TEAM rate ~~application, proposing~~applications, including a recent filing, which proposes to update the TEAM surcredit to refund ~~$6.5~~$5.03 million of estimated ~~net~~ EADIT ~~savings, which was approved by~~savings. The adjusted rate is anticipated to be implemented in the ~~ACC effective May 1, 2023 and will be further updated effective November 1, 2023.~~second quarter of 2024.

Customer-Owned Yard Line (“COYL”) Program. Southwest originally received approval, in connection with its 2010 Arizona general rate case, to implement a program to conduct leak surveys, and if leaks were present, to replace and relocate service lines and meters for Arizona customers whose meters were set off from the customer’s home, representing a non-traditional configuration. The COYL program has been subject to proceedings to recover investments since that time. In February ~~2023,~~2024, Southwest requested approval to recover the outstanding revenue requirement of approximately ~~$4.3~~$1.8 million associated with ~~2022~~2023 COYL ~~investments, which increased the COYL recovery rate.~~investments. The ~~new~~existing rate, ~~became~~ effective July 1, ~~2023.~~2023, will remain in place until the new rate is approved.

PGA Modification. On March 1, 2023, Southwest filed a request to adjust the interest rate applicable to the outstanding Purchased Gas Adjustment (“PGA”) balance to more closely match the interest expense incurred to finance the balance. In the alternative, the filing requested an expansion of the current ~~gas cost balancing account (“GCBA”)~~GCBA adjustment to clear the then existing $351 million balance. In July 2023, the ACC approved an increase to the GCBA rate (over a two-year period) effective August 1, 2023, to support the timely recovery of the approximately $358 million balance as of May 31, 2023. The increased GCBA rate will remain for up to two years or until the balance drops below $10 million, at which point the GCBA rate will be set to $0.00 per therm, where it will remain until the under- or over-collected balance exceeds $10 million. The ongoing deferred energy rates, separate from the GCBA rates, continue to be updated monthly.


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Nevada Jurisdiction

Nevada General Rate Case. Southwest filed its most recent general rate case in September 2023 ~~proposing a combined statewide revenue increase of $69.8 million~~ based on the test year ended May 2023. The initial request ~~includes~~was updated with a certification filing primarily for plant placed in service and incremental annual leak survey costs through November 2023. Those updates resulted in an updated overall request of $74 million, an increase over the initial request of $69.8 million. A stipulation was reached with Regulatory Operations Staff and the Bureau of Consumer Protection, settling certain issues and agreeing to a black box settlement with a statewide increase of $65.6 million, before any adjustments for the cost of capital. Following a hearing on cost of capital issues, the PUCN issued a decision approving an annual increase of revenues of $59 million, approving the proposed settlement, and authorizing a return on common equity of ~~10.0% relative to~~9.5%, including the use of a hypothetical capital structure of 50% ~~target equity ratio; an increase~~debt and 50% equity. Included in ~~rate base of approximately $250 million;~~the settled items are a continuation of full revenue ~~decoupling under the General Revenues Adjustment (“GRA”) mechanism; recovery of approximately $4 million in~~decoupling; authority to continue tracking incremental annual leak survey ~~costs; the inclusion of new~~costs in a regulatory asset (discussed further below); and refreshed depreciation rates ~~supported by a depreciation study~~ that ~~proposes to increase depreciation rates by $7.8 million; and to reflect in rates a level of operations and maintenance expense representative of current costs.~~are somewhat lower than proposed. New rates ~~are anticipated~~became effective in April 2024. ~~Southwest’s previous general rate case concluded in February 2022, with rates effective April 1, 2022.~~

General Revenues Adjustment. The ~~GRA~~General Revenues Adjustment (“GRA”), or Nevada decoupling mechanism, was affirmed as part of Southwest’s most recently concluded general rate case ~~with an expansion to include a large customer class (with average monthly throughput requirements greater than 15,000 therms), effective April 2022. Southwest makes~~and adjustments are included in the Annual Rate Adjustment (“ARA”) filings intended to update rates to ~~recover or~~ recover/return amounts associated with various regulatory mechanisms, including the GRA. Southwest made its most recent ARA filing in November ~~2022~~2023 related to the approximate ~~$19~~$8.7 million over-collected balance as of September 30, ~~2022. Given the magnitude~~2023. Recovery of the outstanding balances, further discussion with the parties resulted in a settlement of the issues and utilizing a more current GRA balance of approximately $12 million as of January 2023 to more closely align the rates implemented with the existing balance. Recovery rates and adjustments thereto as part of the ARA primarily impact cash flows, but not net income overall. Updated rates for the GRA and other regulatory mechanisms included in the ARA ~~became~~filing will become effective May 1, 2024, earlier than the typical July 1, ~~2023.~~2024 effective date due to a commission-approved settlement.


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Nevada Leak Survey. In 2019, the PUCN opened an Investigation and Rulemaking action to consider certain amendments to the Nevada Administrative Code requiring annual leak surveys of distribution pipelines transporting natural gas or liquid petroleum. The increased survey activity was to focus on business districts and to be conducted generally on an annual basis (not exceeding 15-month survey intervals). The proposed regulations were permanently adopted ~~with a~~effective January 1, ~~2023 effective date.~~2023. Regulatory asset treatment was approved for the purpose of tracking incremental costs associated with implementing the increased leak ~~surveys, which resulted~~surveys. Continuation of the program, along with recovery of earlier incurred amounts over a two-year period, was approved in ~~the inclusion of approximately $4 million in~~conjunction with Southwest’s ~~pending~~recently completed general rate case.

California Jurisdiction

Attrition Filing. Following the 2021 implementation of rates approved as part of the most recent general rate case, the continuation of annual Post Test Year (“PTY”) margin attrition increases of 2.75% began in January ~~2022, with the latest~~2022. The most recent annual margin attrition increase was also inclusive of ~~approximately $2.2~~adjustments related to the amortization of EADIT and the impact of the Automatic Trigger Mechanism (“ATM”) on authorized rate base. The ATM adjusts the rate of return up or down (in this case, up) as a result of changes in the average utility bond yield that exceed 100 basis points. The cumulative impact results in an annual increase of $6.9 million effective January 1, 2023. The annual attrition adjustments are intended to reflect changes in the cost of service between general rate cases, thereby stabilizing customer bill impact by implementing gradual changes in rates. The recent order also approved the inclusion of the revenue requirement associated with2024 for Southwest’s ~~North~~southern California, northern California, and South Lake Tahoe Lateral project in rates as a PTY margin adjustment, as phases of the project are placed into service and become operational. The PTY margin increase of approximately $1.3 million associated with the project became effective February 1, 2023.rate jurisdictions.

FERC Jurisdiction

~~MountainWest Overthrust Pipeline.~~General Rate Case. Great Basin Gas Transmission Company (“Great Basin”), a wholly owned subsidiary of Southwest, Onfiled notice of a change in rates (pursuant to applicable regulations) on March 6, 2024, requesting that rates for natural gas service subject to the filing be made effective April 6, 2024. The FERC, however, suspended the case for a five-month period, which will allow rates to go into effect, subject to refund, September ~~22, 2022,~~6, 2024.The filing includes a request to continue a term-differentiated rate structure which was adopted as part of Great Basin’s last general rate case, an overall revenue increase of approximately $16 million, and a return on equity of 14.05% and 13.05% applicable to each category of shippers, as applicable, and a capital structure of 44% long-term debt and 56% common equity. A primary driver of the proposed increase is approximately $99 million of capital investments anticipated to be placed in service by the end of the August 31, 2024 test year. Motion rates, subject to refund, are anticipated to become effective in September 2024, subject to refund as indicated, with an initial decision during the period of Southwest Gas Holdings’ ownership of the MountainWest entities, the FERC issued an order initiating an investigation, pursuant to section 5 of the Natural Gas Act, to determine whether rates charged by MountainWest Overthrust Pipeline, LLC, a subsidiary of MountainWest, were just and reasonable and setting the matter for hearing (the “Section 5 Rate Case”). A settlement was reached whereby the Company recorded a charge of $28.4 million in the firstsecond quarter of 2023, which was included in Goodwill impairment and loss on sale on the Company’s Condensed Consolidated Statements of Income. The settlement was approved and the $28.4 million was paid in the third quarter of 2023. The matter is now closed.2025.


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PGA Filings

The rate schedules in all of Southwest’s service territories contain provisions that permit adjustment to rates as the cost of purchased gas changes. These deferred energy provisions and purchased gas adjustment clauses are collectively referred to as “PGA” clauses. Differences between gas costs recovered from customers and amounts paid for gas by Southwest result in over- or under-collections. Balances are recovered from or refunded to customers on an ongoing basis with interest. As of ~~September 30, 2023,~~March 31, 2024, under-collections in each of Southwest’s service territories resulted in an asset of ~~$687~~$199 million on the Company’s and Southwest’s Condensed Consolidated Balance Sheets. The substantial reduction in balances receivable between periods in the table below reflects a combination of specific recovery rates in place to collect the build-up of earlier balances as a result of the cost paid for gas in those earlier periods, and recent conditions whereby base rates under the mechanisms have exceeded the cost of recent gas purchases with suppliers.

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

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


(Thousands of dollars)	(Thousands of dollars)		September 30, 2023		December 31, 2022		September 30, 2022		(Thousands of dollars)	March 31, 2024	December 31, 2023	March 31, 2023
Arizona	Arizona		$	301,321	$	292,472	$	269,811
Northern Nevada	Northern Nevada		56,975		27,384		15,619
Southern Nevada	Southern Nevada		294,624		122,959		94,707
California	California		34,217		7,305		1,214
			$	687,137	$	450,120	$	381,351
		$

Capital Resources and Liquidity

Historically, cash on hand and cash flows from operations have provided a substantial portion of cash used in investing activities (primarily for construction expenditures and property additions). In recent years, Southwest has undertaken significant pipe replacement activities to fortify system integrity and reliability, including on an accelerated basis in association with certain gas infrastructure replacement programs. In addition, certain national events, including several major storms in recent years affecting central portions of the U.S., have contributed to the periodic run-up in gas supply costs. This collective activity has necessitated the issuance of both debt and equity securities to supplement cash flows from operations. ~~More recently, a number of conditions, such as winter storms~~Southwest Gas Holdings, Inc. and ~~market forces (including historically low storage levels) have caused gas prices to spike and remain higher during extended periods as~~


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~~compared to previous historical levels. The Company’s~~Southwest’s capitalization strategy is to maintain an appropriate balance of equity and debt to preserve investment-grade credit ratings, which help minimize interest costs. Investment-grade credit ratings have been maintained by Southwest Gas Holdings, Inc. and Southwest.

Cash Flows

Southwest Gas Holdings, Inc.:

Operating Cash Flows. Cash flows ~~from~~provided by consolidated operating activities ~~decreased $105~~increased $729 million in the first ~~nine~~three months of ~~2023~~2024 as compared to the same period of ~~2022.~~2023. The ~~decline~~increase was primarily driven by the change in purchased gas costs for Southwest, including amounts incurred and deferred, as well as impacts related to when amounts are incorporated in customer bills to recover or return deferred balances. ~~Amounts were greatly impacted due~~As noted above, both the rates embedded in customer rates to ~~higher~~support recovery of the previously elevated balance, and recent gas supply costs that have been lower than ~~expected natural gas costs during the most recent winter period, which was reflected in higher Deferred purchased~~base tariff gas cost rates billed to customers have in combination substantially reduced the balances receivable under our PGA mechanisms. These conditions have provided a significant source of available funds in ~~advance of rates to recover~~ the ~~balance.~~current period. The ~~decline~~improvement in cash flows also ~~resulted from~~reflect the impacts of changes in other components of working capital overall, including the timing and amount of accounts payable and other current asset and liability balances.

Corporate and administrative expenses/outflows for Southwest Gas Holdings, Inc. in the ~~nine- and twelve-month periods~~three-month period ended ~~September 30, 2023~~March 31, 2024 mainly include ~~charges related to the MountainWest sale that closed in February 2023,~~ interest paid on borrowings and costs associated with the Centuri separation.

Investing Cash Flows. Cash flows ~~from~~provided by consolidated investing activities ~~increased $961 million~~decreased $1.04 billion in the first ~~nine~~three months of ~~2023~~2024 as compared to the same period of ~~2022.~~2023. The overall ~~increase~~decrease was driven by ~~$1.02~~$1.06 billion in proceeds received in connection with the MountainWest sale ~~(which is net~~(net of cash sold)~~, including impacts of post-closing true-ups and commitments,~~ in 2023, partially offset by ~~an increase in capital expenditures in~~proceeds from the ~~natural gas distribution segment.~~sale of other property.


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Financing Cash Flows. Cash flows from consolidated financing activities ~~decreased $852~~increased $723 million in the first ~~nine~~three months of ~~2023~~2024 as compared to the same period of ~~2022.~~2023. The overall ~~decrease~~increase was primarily due to the first quarter 2023 repayment ($1.1 billion) of the then remaining balance of the term loan entered into by Southwest Gas Holdings, Inc. in ~~November 2021 in~~ connection with the 2021 acquisition of ~~MountainWest. Other~~MountainWest, with no comparable repayment in the current year. Offsetting the increase between periods were impacts ~~included~~also primarily occurring in 2023, including proceeds received from the issuance of common stock in underwritten public offerings in ~~each period ($200~~March 2023 and debt proceeds by Southwest from the 364-day $450 million ~~lower than in the 2022 period), and proceeds from Southwest Gas Holdings entering into a $550 million Term Loan Credit Agreement in April 2023. A substantial portion of the~~ term loan ~~proceeds were contributed~~ to ~~Southwest as equity, which in turn was primarily used by Southwest to repay term loan indebtedness entered into to finance~~address an escalation in ~~purchased~~ gas ~~costs.~~purchases (entered into in January 2023 and repaid in full in April 2023). The first quarter of 2023 also included $300 million of Senior Notes issued by Southwest. Other financing cash flows include borrowings and repayments ~~including~~ under the companies’ credit ~~facilities.~~facilities, and an increase in dividends paid.

The capital requirements and resources of the Company generally are determined independently for the individual business segments. Each business segment is generally responsible for securing its own debt financing sources. However, the holding company may raise funds through stock issuances or other external financing sources in support of each business segment.

Southwest Gas Corporation:

Operating Cash Flows. Cash flows ~~from~~provided by operating activities ~~decreased $76~~increased $806 million in the first ~~nine~~three months of ~~2023~~2024 as compared to the same period of ~~2022.~~2023. The ~~decline~~improvement in operating cash flows was primarily attributable to deferred gas ~~purchases, including amounts incurred and deferred and~~costs change (as discussed above), as well as to other working capital ~~balances (as discussed above).~~changes.

Investing Cash Flows. Cash used in investing activities ~~increased $124~~decreased $28 million in the first ~~nine~~three months of ~~2023~~2024 as compared to the same period of ~~2022. The change was primarily~~2023. While outflows for capital expenditures were generally comparable between periods, the current period reflects offsetting inflows due to ~~increases in capital expenditures in 2023 and decreases~~proceeds received from the sale of property, as well as reduced outflows related to activity associated with customer advances for ~~construction (amounts collected and/or returned) as compared to the same period in the prior year.~~construction. See also NaturalGas Distribution Segment Construction Expenditures, Debt Maturities, and Financing below.

Financing Cash Flows. Net cash ~~provided by~~from financing activities ~~increased $233~~decreased $480 million in the first ~~nine~~three months of ~~2023~~2024 as compared to the same period of ~~2022.~~2023. The ~~increase~~decline was primarily due to ~~$530 million in parent capital contributions, offset by~~activity during the ~~$225 million repayment~~first quarter of ~~the March 2021 Term Loan. A~~2023, including Southwest’s issuance of a $450 million term loan in January 2023 ~~to finance~~along with the ~~escalation in purchased gas cost (noted above) was repaid following the parent capital contribution~~issuance of $300 million notes in the ~~first nine months~~same quarter, offset by a $225 million term loan repayment in that same quarter of ~~2023.~~the prior year. Dividends paid and borrowing and repayment activity ~~aside from the foregoing, including~~ under the credit facility comprise the remaining activity between periods. See Note 5 – Debt.

Natural Gas Distribution Segment Construction Expenditures, Debt Maturities, and Financing

During the ~~twelve-month~~three-month period ended ~~September 30, 2023,~~March 31, 2024, construction expenditures for the natural gas distribution segment were ~~$778~~$191 million (not including amounts incurred for capital expenditures not yet paid). The majority of these expenditures, approximately ~~55%~~51%, ~~were~~were associated with the replacement of existing transmission and distribution pipeline facilities to fortify system integrity and reliability, as well as other general plant expenditures, with the remainder related to new construction.


These expenditures, along with the timing of capital projects, resulted in an increase in the construction work in progress balance as of March 31, 2024.			40

Management estimates natural gas segment construction expenditures during the three-year period ending December 31, ~~2025~~2026 will be approximately ~~$2.0~~$2.4 billion. Of this amount, approximately ~~$720 million to $740~~$830 million is expected to be incurred during calendar year ~~2023.~~2024. Southwest plans to continue to request regulatory support to undertake projects, or to accelerate projects as necessary for the improvement of system flexibility and reliability, or to expand, where relevant, to unserved or underserved areas. Southwest may expand existing, or initiate new, programs. Significant replacement activities are expected to continue well beyond the next few years. See also Rates and Regulatory Proceedings. During the three-year period ending December 31, ~~2025,~~2026, Southwest will be required to renew or otherwise address its credit facility. Southwest has $75 million of long-term debt maturing in 2026, but otherwise no maturities in either 2024 or 2025. Also during that same three-year period, cash flows from operating activities of Southwest are expected to provide approximately ~~75%~~78% of the funding for gas operations of Southwest and total construction expenditures and dividend requirements. ~~Additional~~Any additional cash requirements, including construction-related, and ~~pay down~~any paydown or refinancing of debt, are expected to be provided by existing credit facilities, parent equity contributions, and/or other external financing sources. The timing, types, and amounts of additional external financings will be dependent on a number of factors, including the cost of gas purchases, conditions in capital markets, timing and amount of rate relief, timing and amount of surcharge collections from, or amounts returned to, customers related to other regulatory mechanisms and programs, as well as growth levels in Southwest’s service areas and earnings. External financings may include the issuance of debt securities, bank and other short-term borrowings, and other forms of financing.


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Dividend Policy

Dividends are payable on the Company’s common stock at the discretion of the Board. In setting the dividend rate, the Board considers, among other factors, current and expected future earnings levels, our ongoing capital expenditure plans, expected external funding needs, our payout ratio, and our ability to maintain investment-grade credit ratings and liquidity. The Company has paid dividends on its common stock since 1956. In February ~~2023,~~2024, the Board determined to maintain the quarterly dividend at $0.62 per share, effective with the June ~~2023~~2024 payment. Although no assurances can be provided on our future dividend payments, the Board currently intends to reevaluate the dividend upon the completion of the Centuri separation, and it is anticipated that we will pay a dividend at a level consistent with industry peers.

Liquidity

Several factors (some of which are out of the control of the Company) that could significantly affect liquidity in the future include: variability of natural gas prices, changes in ratemaking policies of regulatory commissions, regulatory lag, customer growth in the natural gas distribution segment, the ability to access and obtain capital from external sources, interest rates, changes in income tax laws, pension funding requirements, inflation, and the level of earnings. Natural gas prices and related gas cost recovery rates, as well as plant investment, have historically had the most significant impact on liquidity.

On an interim basis, Southwest defers over- or under-collections of gas costs to PGA balancing accounts. In addition, Southwest uses this mechanism to either refund amounts over-collected or recoup amounts under-collected as compared to the price paid for natural gas during the period since the last PGA rate change went into effect. At ~~September 30, 2023,~~March 31, 2024, the combined balance in the PGA accounts totaled an under-collection of $~~687~~199 million, and the substantial reduction in the PGA balance as of this date compared to balances existing in recently concluded comparable earlier periods is also highlighted by the substantial cash balance of more than $400 million existing as of March 31, 2024. See PGA Filings for more information. 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 2023, Southwest issued $300 million aggregate principal amount of 5.450% Senior Notes. The notes will mature in March 2028. Southwest used the net proceeds to repay amounts outstanding under Southwest’s credit facility and the remainder for general corporate purposes.

~~In April 2023,~~ ~~Southwest Gas Holdings, Inc.~~ entered into a $550 million Term Loan Credit Agreement that matures in October 2024. Southwest Gas Holdings, Inc. utilized a majority of the proceeds to make an equity contribution to Southwest. On April 17, 2023, Southwest utilized the equity contribution to repay, in full, amounts outstanding under its ~~$450 million~~ ~~364-day term loan entered into in January 2023, with the remainder of the equity contribution used for working capital and general corporate purposes.~~

Southwest Gas Holdings, Inc. has a credit facility with a borrowing capacity of $300 million that expires in December 2026. This facility is intended for short-term financing needs. At ~~September 30, 2023, $57.5~~March 31, 2024, $94 million was outstanding under this facility.

Southwest has a credit facility with a borrowing capacity of $400 million, which expires in April 2025. Southwest designates $150 million of the facility for long-term borrowing needs and the remaining $250 million for working capital purposes. ~~The maximum amount outstanding~~There was no activity on either the long-term ~~portion~~or short-term portions of t~~he credit~~the facility ~~(including a commercial paper program)~~ during the ~~first nine months of 2023 wa~~three-month period ending March 31, 2024. At March 31, 2024, ~~s $150 million. The maximum amount outstanding on the short-term portion of the credit facility~~


			41

~~during the first nine months of 2023 was $75 million. At September 30, 2023,~~ no ~~borrowings~~borrowings were outstanding on either the long-term or short-term portions of the facility. The credit facility can be used as necessary to meet liquidity requirements, including temporarily financing under-collected PGA balances, or meeting the refund needs of over-collected balances. The credit facility has generally been adequate for Southwest’s working capital needs outside of funds raised through operations and other types of external financing. Any additional cash requirements would include the existing credit facility, equity contributions from the Company, and/or other external financing sources.

Southwest has a $50 million commercial paper program. Any issuance under the commercial paper program is supported by Southwest’s current revolving credit facility and, therefore, does not represent additional borrowing capacity. Any borrowing under the commercial paper program is designated as long-term debt. Interest rates for the commercial paper program are calculated at the current commercial paper rate during the borrowing term. At ~~September 30, 2023,~~March 31, 2024, there ~~were~~were no borrowings outstanding under this program.

Centuri has a ~~senior~~ $1.545 billion secured revolving credit and term loan multi-currency facility. The capacity of the line of credit ~~portion comprises $400 million; associated~~is $400 million with related amounts borrowed and repaid ~~are~~ available to be ~~re-borrowed. The~~re-borrowed; the term loan facility ~~portion provided approximately~~has a limit of $1.145 ~~billion in financing.~~billion. The term loan facility expires on August 27, 2028 and the revolving credit facility expires on August 27, 2026. This multi-currency facility allows the borrower to request loan advances in either Canadian dollars or U.S. dollars. The obligations under the credit agreement are secured by present and future ownership interests in substantially all direct and indirect subsidiaries of Centuri, substantially all of the tangible and intangible personal property of each borrower, certain of their direct and indirect subsidiaries, and all products, profits, and proceeds of the foregoing. Centuri assets securing the facility at ~~September 30, 2023~~March 31, 2024 totaled ~~$2.6 billion~~.$2.4 billion. The maximum amount outstanding on the combined facility during the first ~~nine~~three months of ~~2023~~2024 was ~~$1.184 billion~~.$1.117 billion. As of ~~September 30, 2023,~~ ~~$144~~March 31, 2024, $125 million was outstanding on the revolving credit facility, in addition to $1$1 billion that was outstanding on the term loan portion of the facility. Also at ~~September 30, 2023,~~March 31, 2024, there was approximately ~~$180~~$201 million,, net of letters of credit, available for borrowing under the line of credit.


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As discussed earlier, in April 2024, the ~~first quarter~~successful completion of ~~2023, the Company paid off (primarily with proceeds from the MountainWest sale) the remaining balance on the $1.6 billion term loan entered into in November 2021 in connection with the acquisition~~an IPO of ~~MountainWest.~~

~~In March 2023, the Company issued through a separate prospectus supplement under the Universal Shelf, an aggregate of 4.1 million~~14,260,000 shares of Centuri common stock was completed at ~~an underwritten public offering~~a price of ~~$60.12~~$21.00 per share, ~~resulting~~ in addition to a concurrent private placement of 2,591,929 shares at a price equal to the IPO price. The collective net proceeds to ~~the Company~~Centuri approximated $329 million. Centuri used $316 million of ~~$238.4 million, net of an underwriter’s discount of $8.3 million and estimated expenses of~~ the ~~offering. The Company used the net~~ proceeds to repay ~~outstanding amounts under the Company’s credit facility, with remaining amounts used to pay a residual portion of~~ amounts outstanding under ~~the~~its revolving credit and term loan ~~entered into in connection~~facility, with the ~~MountainWest acquisition, and for working capital and other general corporate purposes.~~

In April 2021, the Company entered into a Sales Agency Agreement between the Company and BNY Mellon Capital Markets, LLC and J.P. Morgan Securities LLC (the “Equity Shelf Program”) for the offer and sale of up to $500 million of common stock from time to time in at-the-market offerings under the related prospectus supplement filed with the SEC. There was ~~no activity under this multi-year program during the third quarter of 2023. Net proceeds from the sale of shares of common stock under the Equity Shelf Program are~~remainder intended for general corporate ~~purposes, including~~purposes. Following the ~~acquisition~~IPO, the Company owns approximately 81% of ~~property for~~ the ~~construction, completion, extension, or improvement~~outstanding shares 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 credit facilities, senior notes, or other indebtedness), and to provide for working capital.Centuri common stock. The Company ~~had approximately $341.8 million available under~~intends to further reduce its ownership in Centuri in future periods through sales of its remaining Centuri shares into the ~~program as~~market, a distribution of ~~September 30, 2023. See~~ ~~Note 4 – Common Stock~~Centuri shares to Company stockholders, or through an exchange of Centuri shares for ~~more information.~~Southwest Gas Holdings, Inc. shares, or a combination thereof.

Forward-Looking Statements

This quarterly report contains statements which constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (“Reform Act”). All statements other than statements of historical fact included or incorporated by reference in this quarterly report are forward-looking statements, including, without limitation, statements regarding the Company’s plans, objectives, goals, intentions, projections, strategies, future events or performance, negotiations, and underlying assumptions. The words “may,” “if,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “continue,” “forecast,” “intend,” “endeavor,” “promote,” “seek,” “pursue,” and similar words and expressions are generally used and intended to identify forward-looking statements. For example, statements regarding plans to refinance near-term maturities ~~to separate~~or address expiring credit facilities, those regarding separating from Centuri following the completed IPO, by means of sales into the market, a distribution to Company stockholders, or through an ~~IPO~~exchange of Centuri shares for Southwest Gas Holdings, Inc. shares, or a ~~spin-off from the Company, other means or at all, including regarding~~combination thereof, and any references as to the timing of any separation of Centuri, those regarding operating margin patterns, customer growth, the composition of our customer base, price volatility, utility optimization initiatives, the level of expense or cost containment, seasonal patterns, the ability to pay debt, the Company’s COLI strategy, the magnitude of future acquisition or divestiture purchase price true-ups or post-closing payments


			42

and related impairments or losses related thereto, replacement market and new construction market, impacts from pandemics, including on our employees, customers, business, financial position, earnings, bad debt expense, work deployment and related uncertainties, expected impacts of valuation adjustments associated with any redeemable noncontrolling interests, the profitability of storm work, mix of work, or absorption of fixed costs by larger infrastructure services customers (including Southwest), the impacts of U.S. tax reform including disposition in any regulatory proceeding and bonus depreciation tax deductions, plans and expectations regarding the tax treatment of a separation of Centuri, the impact of any Pipeline and Hazardous Materials Safety Administration rulemaking, the amounts and timing for completion of estimated future construction expenditures, plans to pursue infrastructure programs or programs under SB 151 legislation, forecasted operating cash flows and results of operations, net earnings impacts or recovery of costs from gas infrastructure replacement programs and surcharges, funding sources of cash requirements, amounts generally expected to be reflected in future period revenues from regulatory rate proceedings including amounts requested or settled from recent and ongoing general rate cases or other regulatory proceedings, rates and surcharges, PGA administration, recovery and timing, and other rate adjustments, sufficiency of working capital and current credit facilities or the ability to cure negative working capital balances, bank lending practices, the Company’s views regarding its liquidity position, ability to raise funds and receive external financing capacity and the intent and ability to issue various financing instruments and stock under ~~the existing~~a planned at-the-market equity program or otherwise, future dividends or increases and the Board’s current payout strategy, pension and postretirement benefits, certain impacts of tax acts, the effect of any other rate changes or regulatory proceedings, contract or construction change order negotiations, impacts of accounting standard updates, statements regarding future gas prices, gas purchase contracts and pipeline imbalance charges or claims related thereto, recoverability of regulatory assets, the impact of certain legal proceedings or claims, and the timing and results of future rate hearings, including any ongoing or future general rate cases and other proceedings, and statements regarding pending approvals, including proposed regulatory mechanisms, are forward-looking statements. All forward-looking statements are intended to be subject to the safe harbor protection provided by the Reform Act.

A number of important factors affecting the business and financial results of the Company could cause actual results to differ materially from those stated in the forward-looking statements. These factors include, but are not limited to, customer growth rates, conditions in the housing market, inflation, interest rates and related government actions, sufficiency of labor markets and ability to timely hire qualified employees or similar resources, acquisition and divestiture decisions including prices paid or received, adjustments, indemnifications, or commitments related thereto, and their impacts to impairments, write-downs, or losses or expenses generally, the impacts of pandemics including that which may result from a restriction by government officials or otherwise, including impacts on employment in our territories, the health impacts to our customers and employees, the ability to collect on customer accounts due to the earlier suspension or lifted moratorium on late fees or service disconnection or otherwise in any or all jurisdictions, the ability to obtain regulatory recovery of related costs, the ability of the infrastructure services business to conduct work and the impact of a delay or termination of work, and decisions of Centuri customers (including Southwest) as to whether to pursue capital projects due to economic impacts resulting from a pandemic or


			37

otherwise, the ability to recover and timing thereof related to costs associated with the PGA mechanisms or other regulatory assets or programs, the effects of regulation/deregulation, governmental or regulatory policy regarding pipeline safety, greenhouse gas emissions, natural gas, including potential prohibitions on the use of natural gas by customers or potential customers, including related to electric generation or natural gas appliances, or regarding alternative energy, the regulatory support for ongoing infrastructure programs or expansions, the timing and amount of rate relief, the impact of other regulatory proceedings, the timing and methods determined by regulators to refund amounts to customers resulting from U.S. tax reform, changes in rate design, impacts of other tax regulations, including industry-specific tax regulations, variability in volume of gas or transportation service sold to customers, changes in gas procurement practices, changes in capital requirements and funding, the impact of credit rating actions and conditions in the capital markets on financing costs, changes in construction expenditures and financing, levels of or changes in operations and maintenance expenses, or other costs, including fuel costs and other costs impacted by inflation or otherwise, the results of any cost containment efforts, geopolitical influences on the business or its costs, effects of pension or other postretirement benefit expense forecasts or plan modifications, accounting changes and regulatory treatment related thereto, currently unresolved and future liability claims and disputes, changes in pipeline capacity for the transportation of gas and related costs, results of Centuri bid work, the impact of weather, delays, or customer budgetary plans on Centuri’s operations, projections about acquired business’ earnings, or those that may be planned, future acquisition-related costs, differences between the actual experience and projections in costs to integrate or stand-up portions of newly acquired business operations, impacts of changes in the value of any redeemable noncontrolling interests if at other than fair value, Centuri utility infrastructure expenses, differences between actual and originally expected outcomes of Centuri bid or other fixed-price construction agreements, outcomes from contract and change order negotiations, ability to successfully procure new work and impacts from work awarded or failing to be awarded from significant customers (collectively, including from Southwest) or related to significant projects, the mix of work awarded, the amount of work awarded to Centuri following the lifting of work stoppages or reduction, the result of productivity inefficiencies from regulatory requirements or efficiencies in performing storm-related or other types of work, the frequency or amount of work associated with storms, customer supply chain challenges, or otherwise, delays or challenges in commissioning individual projects, acquisitions and management’s plans related thereto, the ability of management to successfully finance, close, and assimilate any acquired


			43

businesses, the timing and ability of management to successfully consummate the Centuri separation following the completed IPO, the impact on our stock price or our credit ratings due to undertaking or failing to undertake acquisition or divestiture activities or other strategic endeavors, the impact on our stock price, costs, actions or disruptions or continuation thereof related to significant stockholders and their activism, competition, our ability to raise capital in external financings, our ability to continue to remain within the ratios and other limits subject to our debt covenants, and ongoing evaluations in regard to goodwill, other intangible assets, and optimization initiatives. In addition, the Company can provide no assurance that its discussions regarding certain trends or plans relating to its financing and operating expenses will continue, proceed as planned, or cease to continue, or fail to be alleviated, in future periods. For additional information on the risks associated with the Company’s business, see Item 1A. Risk Factors and Item 7A. Quantitative and Qualitative Disclosures About Market Risk in the Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023.

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See Item 7A. Quantitative and Qualitative Disclosures about Market Risk in the ~~2022~~2023 Annual Report on Form 10-K filed with the SEC. No material changes have occurred related to the disclosures about market ~~risk.~~risk since December 31, 2023.


			38

ITEM 4. CONTROLS AND PROCEDURES

Management of Southwest Gas Holdings, Inc. and Southwest Gas Corporation has established disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to provide reasonable assurance that information required to be disclosed in their respective reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to management of each company, including each respective Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and benefits of controls must be considered relative to their costs. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or management override of the control. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.

Based on the most recent evaluation, as of ~~September 30, 2023,~~March 31, 2024, management of Southwest Gas Holdings, Inc. and Southwest Gas Corporation, including the Chief Executive Officer and Chief Financial Officer, believes the Company’s and Southwest’s disclosure controls and procedures are effective at attaining the level of reasonable assurance noted above.

There have been no changes in the Company’s or Southwest’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the ~~third~~first quarter of ~~2023~~2024 that have materially affected, or are likely to materially affect the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

~~ITEM 1A. RISK FACTORS~~

Described below is a risk factor we have identified that may have a negative impact on our future financial performance or affect whether we achieve the goals or expectations expressed or implied in any forward-looking statements contained herein. This risk factor supplements, but does not replace, the Risk Factors and other disclosures made in our Annual Report on Form 10-K filed February 28, 2023 or in our Quarterly Reports on Form 10-Q filed May 9, 2023 and August 9, 2023.

~~Our options for separating Centuri may be limited by market conditions and tax considerations.Any separation transaction of Centuri may not occur on the anticipated timeline and may not have the anticipated benefits.~~


			44

On December 15, 2022, we announced our intention to pursue a spin-off of Centuri into an independent publicly-traded company, subject to the satisfaction of certain conditions, including receipt of favorable rulings from the IRS and receipt of other regulatory approvals. On September 22, 2023, we announced that Centuri Holdings had confidentially submitted a draft registration statement with respect to an initial public offering of its shares of common stock (the “Centuri IPO”). On November 6, 2023, we announced that the IRS had advised us that it had exercised its discretion not to rule on certain tax questions related to a potential spin-off of Centuri due to the fact-intensive nature of the questions presented. We remain committed to separating Centuri and continue to assess the value of a potential tax-free spin-off of Centuri, either following, or in lieu of, a potential initial public offering by Centuri. Following a Centuri IPO, if one occurs, we intend to maintain the flexibility to dispose of our interests in a number of ways, including through a spin-off transaction, open market sales of Centuri Holdings common stock or an exchange offer of our common stock for Centuri Holdings common stock.

~~A Centuri IPO may not occur for a number of reasons, including, but not limited to, adverse market conditions, negative investor feedback or declines in business performance.If the Centuri IPO does not occur, our options for separating Centuri will be limited, and we may be forced to pursue a spin-off of Centuri even if such spin-off may be taxable to us.~~

While we intend that any spin-off transaction, if effected, will qualify as a tax-free transaction to our stockholders, the ability to effect a tax-free spin-off to the Company (as opposed to our stockholders) could be lost if a 355 Ownership Change occurs within applicable time periods for purposes of Section 355(e) of the Internal Revenue Code. We have taken certain actions, including the adoption of the Plan, to help preserve the tax-free nature of any spin-off transaction. However, we can provide no assurance that such actions will ultimately permit us to complete a spin-off that is tax-free to us or that our existing net operating losses will fully offset the impact of any spin-off that is taxable to us.

In addition, if we pursue a spin-off of Centuri without a Centuri IPO, we or Centuri may not realize any cash proceeds from a separation, which may cause us to pay transaction expenses and taxes, if applicable, out of cash on hand, to the extent available, or to incur additional indebtedness, and would likely cause Centuri to continue to have significant outstanding indebtedness. If we are required to seek additional third-party financing either for us or for Centuri in connection with a spin-off, it may delay the timing of the transaction.

Executing the proposed separation also requires significant time and attention from management, which could distract them from other tasks in operating our business and disrupt our operations. We cannot provide assurances that the Centuri IPO and the other transactions described above, if consummated, will yield greater net benefits to the Company and its shareholders than if the Centuri IPO and/or other transactions described above had not occurred. If we fail to achieve some or all of the benefits expected to result from the Centuri IPO and/or other potential separation transactions described above, or if such benefits are delayed, our business, operating results and financial condition could be materially and adversely affected.

ITEM 21A through 3. None.

ITEM 4. MINE SAFETY DISCLOSURES Not applicable.

ITEM 5. OTHER INFORMATION

During the fiscal quarter ended ~~September 30, 2023,~~March 31, 2024, none of our directors or Section 16 officers informed us of the adoption or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Regulation S-K, Item 408.


			4539

ITEM 6. EXHIBITS

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



Exhibit ~~3.1~~10.1	-	Amendment No.4 to Second Amended and Restated ~~Bylaws of Southwest Gas Holdings, Inc., effective October~~Centuri Credit Agreement . 20 ,~~2023.~~ ~~Incorporate~~d Incorporated herein by reference to Exhibit ~~3.1~~10.1 to F orm 8 -K dated March 22, 2024. File No . 001-37976 .

Exhibit 10.2	-	Separation Agreement, dated as of April 11, 2024, by and between Southwest Gas Holding, Inc. and Centuri Holdings, Inc. Incorporated herein by reference to Exhibit 10.1 to Form 8-K dated ~~October 2~~5 ~~, 2023.~~April 11, 2024. File No. 001-37976.

Exhibit ~~3.2~~10.3	-	~~Certificate~~Tax Matters Agreement, dated as of ~~Designations of the Series A Junior Participating Preferred Stock~~ ~~(previously filed~~April 11, 2024, by and i ~~ncorporated~~ between Southwest Gas Holding, Inc. and Centuri Holdings, Inc. Incorporated herein by reference to Exhibit ~~3.1~~10.2 to ~~the Registrant~~’~~s Current report on~~ Form 8-K ~~filed on~~No ~~vember 6, 2023.~~dated April 11, 2024. File No. 001-37976.

Exhibit ~~4.1~~10.4	-	~~Tax-Free Spin Protection Plan,~~Registration Rights Agreement, dated ~~November 5, 2023,~~as of April 11, 2024, by and between Southwest Gas Holding, Inc. and Centuri Holdings, Inc. ~~and Equiniti Trust Company, LLC, as Rights Agent(previously filed and incorporated~~Incorporated herein by reference to Exhibit ~~4.1~~10.3 to ~~the Registrant’s Current Report on~~ Form 8-K ~~filed on November 6, 2023).~~dated April 11, 2024. File No. 001-37976.

~~Exhibit 10.01#~~		~~Form of~~ ~~Indemnification Agreement~~ ~~for Southwest Gas Holdings, Inc. Directors and Officers~~

~~Exhibit 10.02#~~		~~Form of~~ ~~Indemnification Agreement~~ ~~for Southwest Gas Corporation Directors and Officers~~

Exhibit 31.01#	-	Section 302 Certifications–Southwest Gas Holdings, Inc.

Exhibit 31.02#	-	Section 302 Certifications–Southwest Gas Corporation

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

Exhibit 32.02#	-	Section 906 Certifications–Southwest Gas Corporation

Exhibit 101#	-	The following materials from the Quarterly Report on Form 10-Q of Southwest Gas Holdings, Inc. and Southwest Gas Corporation for the quarter ended ~~September 30, 2023,~~March 31, 2024, 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.


			4640

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



Southwest Gas Holdings, Inc.
(Registrant)

Dated: ~~November~~May 8, ~~2023~~2024



/s/ LORI L. COLVIN
Lori L. Colvin
Vice President/Controller and Chief Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



Southwest Gas Corporation
(Registrant)

Dated: ~~November~~May 8, ~~2023~~2024



/s/ LORI L. COLVIN
Lori L. Colvin
Vice President/Controller and Chief Accounting Officer


			4741


	Three Months Ended September 30, 2023						Three Months Ended September 30, 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	$	(10)	$	34
Amortization of net actuarial (gain)/loss	333		(80)		253		8,705		(2,089)		6,616
Regulatory adjustment	(118)		28		(90)		(7,268)		1,744		(5,524)
Total other comprehensive income (loss) - Southwest Gas Corporation	259		(63)		196		1,481		(355)		1,126
Foreign currency translation adjustments:
Translation adjustments	(2,261)		—		(2,261)		(5,830)		—		(5,830)
Foreign currency other comprehensive income (loss)	(2,261)		—		(2,261)		(5,830)		—		(5,830)
Total other comprehensive income (loss) - Southwest Gas Holdings, Inc.	$	(2,002)	$	(63)	$	(2,065)	$	(4,349)	$	(355)	$	(4,704)

	Nine Months Ended September 30, 2023						Nine Months Ended September 30, 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	$	132	$	(33)	$	99	$	132	$	(32)	$	100
Amortization of net actuarial (gain)/loss	1,000		(240)		760		26,114		(6,267)		19,847
Regulatory adjustment	(356)		86		(270)		(21,804)		5,233		(16,571)
Pension plans other comprehensive income (loss)	776		(187)		589		4,442		(1,066)		3,376
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	776		(187)		589		4,987		(1,195)		3,792
Foreign currency translation adjustments:
Translation adjustments	130		—		130		(7,263)		—		(7,263)
Foreign currency other comprehensive income (loss)	130		—		130		(7,263)		—		(7,263)
Total other comprehensive income (loss) - Southwest Gas Holdings, Inc.	$	906	$	(187)	$	719	$	(2,276)	$	(1,195)	$	(3,471)


	Twelve Months Ended September 30, 2023						Twelve Months Ended September 30, 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		(43)		132		372		(90)		282
Amortization of net actuarial (gain)/loss	9,704		(2,330)		7,374		37,263		(8,942)		28,321

Regulatory adjustment	(6,784)		1,628		(5,156)		(81,273)		19,506		(61,767)
Pension plans other comprehensive income (loss)	7,174		(1,725)		5,449		15,538		(3,728)		11,810
FSIRS (designated hedging activities):
Amounts reclassified into net income	—		—		—		1,087		(259)		828
FSIRS other comprehensive income (loss)	—		—		—		1,087		(259)		828
Total other comprehensive income (loss) - Southwest Gas Corporation	7,174		(1,725)		5,449		16,625		(3,987)		12,638
Foreign currency translation adjustments:
Translation adjustments	1,260		—		1,260		(6,919)		—		(6,919)
Foreign currency other comprehensive income (loss)	1,260		—		1,260		(6,919)		—		(6,919)
Total other comprehensive income (loss) - Southwest Gas Holdings, Inc.	$	8,434	$	(1,725)	$	6,709	$	9,706	$	(3,987)	$	5,719