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

The table below provides details of activity in equity and the noncontrolling interest for Southwest Gas Holdings, Inc. on a consolidated basis during the three months ended March 31, 2018.


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

March 31, 2018		48,337	$	49,967	$	965,480	$	(56,363	)	$	920,454		$	(3,162	)	$	1,876,376

(a)	Release of excess deferred taxes accumulated prior to December 22, 2017 (date of enactment of the TCJA), as a result of the adoption of ASU 2018-02, which permitted such release.

The table below provides details of activity in equity for Southwest Gas Corporation during the three months ended March 31, 2018. Only equity shares of the Company are publicly traded, under the ticker symbol “SWX.”


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

March 31, 2018		47,482	$	49,112	$	948,199		$	(54,843	)	$	736,676		$	1,679,144

(a)	Release of excess deferred taxes accumulated prior to December 22, 2017 (date of enactment of the TCJA), as a result of the adoption of ASU 2018-02, which permitted such release.

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

The following information provides insight into amounts impacting the Company’s Other Comprehensive Income (Loss), both before and after-tax impacts, within the Condensed Consolidated Statements of Comprehensive Income, which also impact Accumulated Other Comprehensive Income in the Condensed Consolidated Balance Sheets and the associated column in the equity table above. See Note 4 – Derivatives and Fair Value Measurements for additional information on the FSIRS.

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

(Thousands of dollars)


	Three Months Ended									Three Months Ended
	March 31, 2018									March 31, 2017
	Before-			Tax			Net-of-			Before-			Tax			Net-of-
	Tax			(Expense)			Tax			Tax			(Expense)			Tax
	Amount			or Benefit (1)			Amount			Amount			or Benefit (1)			Amount
Defined benefit pension plans:
Amortization of prior service cost	$	334		$	(80	)	$	254		$	334		$	(127	)	$	207
Amortization of net actuarial (gain)/loss		8,404			(2,017	)		6,387			6,361			(2,417	)		3,944
Regulatory adjustment		(7,560	)		1,814			(5,746	)		(5,735	)		2,179			(3,556	)

Pension plans other comprehensive income (loss)		1,178			(283	)		895			960			(365	)		595
FSIRS (designated hedging activities):
Amounts reclassified into net income		837			(202	)		635			836			(318	)		518

FSIRS other comprehensive income		837			(202	)		635			836			(318	)		518

Total other comprehensive income (loss) - Southwest Gas Corporation		2,015			(485	)		1,530			1,796			(683	)		1,113

Foreign currency translation adjustments:
Translation adjustments		(911	)		—			(911	)		220			—			220

Foreign currency other comprehensive income (loss)		(911	)		—			(911	)		220			—			220

Total other comprehensive income (loss) - Southwest Gas Holdings, Inc.	$	1,104		$	(485	)	$	619		$	2,016		$	(683	)	$	1,333


	Twelve Months Ended									Twelve Months Ended
	March 31, 2018									March 31, 2017
	Before-			Tax			Net-of-			Before-			Tax			Net-of-
	Tax			(Expense)			Tax			Tax			(Expense)			Tax
	Amount			or Benefit (1)			Amount			Amount			or Benefit (1)			Amount
Defined benefit pension plans:
Net actuarial gain/(loss)	$	(43,027	)	$	10,326		$	(32,701	)	$	(22,770	)	$	8,652		$	(14,118	)
Amortization of prior service cost		1,335			(460	)		875			1,335			(507	)		828
Amortization of net actuarial (gain)/loss		27,488			(9,269	)		18,219			26,660			(10,131	)		16,529
Regulatory adjustment		10,515			(115	)		10,400			(5,196	)		1,974			(3,222	)

Pension plans other comprehensive income (loss)		(3,689	)		482			(3,207	)		29			(12	)		17

FSIRS (designated hedging activities):
Amounts reclassified into net income		3,345			(1,155	)		2,190			3,345			(1,271	)		2,074

FSIRS other comprehensive income		3,345			(1,155	)		2,190			3,345			(1,271	)		2,074

Total other comprehensive income (loss) - Southwest Gas Corporation		(344	)		(673	)		(1,017	)		3,374			(1,283	)		2,091

Foreign currency translation adjustments:
Translation adjustments		640			—			640			(401	)		—			(401	)

Foreign currency other comprehensive income (loss)		640			—			640			(401	)		—			(401	)

Total other comprehensive income (loss) - Southwest Gas Holdings, Inc.	$	296		$	(673	)	$	(377	)	$	2,973		$	(1,283	)	$	1,690

(1)

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

Approximately $2.5 million of realized losses (net of tax) related to the FSIRS, reported in Accumulated other comprehensive income (“AOCI”) at March 31, 2018, will be reclassified into interest expense within the next 12 months as the related interest payments on long-term debt occur.

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

AOCI - Rollforward

(Thousands of dollars)


	Defined Benefit Plans									FSIRS									Foreign Currency Items
	Before-Tax			Tax (Expense) Benefit (5)			After-Tax			Before-Tax			Tax (Expense) Benefit (5)			After-Tax			Before-Tax			Tax (Expense) Benefit		After-Tax			Other			AOCI
Beginning Balance AOCI December 31, 2017	$	(61,520	)	$	22,293		$	(39,227	)	$	(12,655	)	$	4,809		$	(7,846	)	$	(609	)	$	—	$	(609	)	$	—		$	(47,682	)

Translation adjustments		—			—			—			—			—			—			(911	)		—		(911	)		—			(911	)

Other comprehensive income before reclassifications		—			—			—			—			—			—			(911	)		—		(911	)		—			(911	)
FSIRS amounts reclassified from AOCI (1)		—			—			—			837			(202	)		635			—			—		—			—			635
Amortization of prior service cost (2)		334			(80	)		254			—			—			—			—			—		—			—			254
Amortization of net actuarial loss (2)		8,404			(2,017	)		6,387			—			—			—			—			—		—			—			6,387
Regulatory adjustment (3)		(7,560	)		1,814			(5,746	)		—			—			—			—			—		—			—			(5,746	)

Net current period other comprehensive income (loss) attributable to Southwest Gas Holdings, Inc.		1,178			(283	)		895			837			(202	)		635			(911	)		—		(911	)		—			619

Reclass of stranded deferred taxes due to TCJA (4)		—			—			—			—			—			—			—			—		—			(9,300	)		(9,300	)

Ending Balance AOCI March 31, 2018	$	(60,342	)	$	22,010		$	(38,332	)	$	(11,818	)	$	4,607		$	(7,211	)	$	(1,520	)	$	—	$	(1,520	)	$	(9,300	)	$	(56,363	)

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

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

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

(4)	Release of excess deferred taxes accumulated prior to December 22, 2017 (date of enactment of the TCJA), as a result of the adoption of ASU 2018-02, which permitted such release.

(5)	Tax amounts related to the before-tax balance at March 31, 2018 are calculated using a 24% rate after the release of previously stranded excess deferred taxes existing as a result of the TCJA; amounts prior to the December 22, 2017 enactment of the TCJA were calculated using a 38% rate.

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

AOCI - Rollforward

(Thousands of dollars)


	Defined Benefit Plans									FSIRS
	Before-Tax			Tax (Expense) Benefit (10)			After-Tax			Before-Tax			Tax (Expense) Benefit (10)			After-Tax			Other			AOCI
Beginning Balance AOCI December 31, 2017	$	(61,520	)	$	22,293		$	(39,227	)	$	(12,655	)	$	4,809		$	(7,846	)	$	—		$	(47,073	)

FSIRS amounts reclassified from AOCI (6)		—			—			—			837			(202	)		635			—			635
Amortization of prior service cost (7)		334			(80	)		254			—			—			—			—			254
Amortization of net actuarial loss (7)		8,404			(2,017	)		6,387			—			—			—			—			6,387
Regulatory adjustment (8)		(7,560	)		1,814			(5,746	)		—			—			—			—			(5,746	)

Net current period other comprehensive income (loss) attributable to Southwest Gas Corporation		1,178			(283	)		895			837			(202	)		635			—			1,530

Reclass of stranded deferred taxes due to TCJA (9)		—			—			—			—			—			—			(9,300	)		(9,300	)

Ending Balance AOCI March 31, 2018	$	(60,342	)	$	22,010		$	(38,332	)	$	(11,818	)	$	4,607		$	(7,211	)	$	(9,300	)	$	(54,843	)

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

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

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

(9)	Release of excess deferred taxes accumulated prior to December 22, 2017 (date of enactment of the TCJA), as a result of the adoption of ASU 2018-02, which permitted such release.

(10)	Tax amounts related to the before-tax balance at March 31, 2018 are calculated using a 24% rate after the reclass of previously stranded excess deferred taxes existing as a result of the TCJA; amounts prior to the December 22, 2017 enactment of the TCJA were calculated using a 38% rate.

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

Amounts Recognized in AOCI (Before Tax)

(Thousands of dollars)


	March 31, 2018			December 31, 2017
Net actuarial (loss) gain	$	(440,151	)	$	(448,555	)
Prior service cost		(4,034	)		(4,368	)
Less: amount recognized in regulatory assets		383,843			391,403

Recognized in AOCI	$	(60,342	)	$	(61,520	)