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Equity, Other Comprehensive Income, and Accumulated Other Comprehensive Income
 9 Months Ended
Sep. 30, 2018
Equity [Abstract]  
Equity, Other Comprehensive Income, and Accumulated Other Comprehensive Income
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 the Company on a consolidated basis during the nine months ended September 30, 2018.
 
 
Southwest Gas Holdings, Inc. Equity
 
 
 
 
 
 
Common Stock
 
Additional Paid-in Capital
 
Accumulated
Other
Comprehensive Income (Loss)
 
Retained Earnings
 
Non-controlling Interest
 
 
(In thousands, except per share amounts)
 
Shares
 
Amount
 
 
 
 
 
Total
December 31, 2017
 
48,090

 
$
49,720

 
$
955,332

 
$
(47,682
)
 
$
857,398

 
$
(2,365
)
 
$
1,812,403

Common stock issuances
 
1,333

 
1,333

 
93,218

 
—

 
—

 
—

 
94,551

Net income (loss)
 
—

 
—

 
—

 
—

 
112,973

 
(797
)
 
112,176

Foreign currency exchange translation adjustment
 
—

 
—

 
—

 
(1,002
)
 
—

 
—

 
(1,002
)
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net actuarial gain (loss) arising during period, less amortization of unamortized benefit plan cost, net of tax
 
—

 
—

 
—

 
2,687

 
—

 
—

 
2,687

Amounts reclassified to net income, net of tax (FSIRS)
 
—

 
—

 
—

 
1,907

 
—

 
—

 
1,907

Reclassification of excess deferred taxes (a)
 
—

 
—

 
—

 
(9,300
)
 
9,300

 
—

 
—

Change in ownership of noncontrolling interest (b)
 
—

 
—

 
(2,710
)
 
—

 
—

 
2,710

 
—

Dividends declared
 


 


 


 


 


 


 


Common: $1.56 per share
 
—

 
—

 
—

 
—

 
(76,941
)
 
—

 
(76,941
)
September 30, 2018
 
49,423

 
$
51,053

 
$
1,045,840

 
$
(53,390
)
 
$
902,730

 
$
(452
)
 
$
1,945,781

(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)
Centuri, through its subsidiary, NPL, has historically held a 65% ownership interest in IntelliChoice Energy, LLC (“ICE”). A residual interest of 35% has been held by a third party. During the second quarter of 2018, an additional $1 million of capital was contributed by NPL, thereby increasing NPL’s ownership interest to 95%. The carrying amount of the noncontrolling interest has been adjusted with a corresponding charge to Additional paid-in capital on the Company’s Condensed Consolidated Balance Sheet.
The table below provides details of activity in equity for Southwest during the nine months ended September 30, 2018. Only equity shares of the Company are publicly traded, under the ticker symbol “SWX.”
 
 
Southwest Gas Corporation Equity
 
 
 
 
Common Stock
 
Additional Paid-in Capital
 
Accumulated
Other
Comprehensive Income (Loss)
 
Retained Earnings
 
 
(In thousands)
 
Shares
 
Amount
 
 
 
 
Total
December 31, 2017
 
47,482

 
$
49,112

 
$
948,767

 
$
(47,073
)
 
$
659,193

 
$
1,609,999

Net income
 
—

 
—

 
—

 
—

 
79,301

 
79,301

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
 
 
Net actuarial gain (loss) arising during period, less amortization of unamortized benefit plan cost, net of tax
 
—

 
—

 
—

 
2,687

 
—

 
2,687

Amounts reclassified to net income, net of tax (FSIRS)
 
—

 
—

 
—

 
1,907

 
—

 
1,907

Reclassification of excess deferred taxes (a)
 
—

 
—

 
—

 
(9,300
)
 
9,300

 
—

Stock-based compensation (b)
 
—

 
—

 
1,899

 
—

 
(510
)
 
1,389

Dividends declared to Southwest Gas Holdings, Inc.
 
—

 
—

 
—

 
—

 
(66,000
)
 
(66,000
)
Contributions from Southwest Gas Holdings, Inc.
 
—

 
—

 
90,644

 
—

 
—

 
90,644

September 30, 2018
 
47,482

 
$
49,112

 
$
1,041,310

 
$
(51,779
)
 
$
681,284

 
$
1,719,927

 
(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 5 – 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
 
 
September 30, 2018
 
September 30, 2017
 
 
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
 
$
334

 
$
(80
)
 
$
254

 
$
333

 
$
(126
)
 
$
207

Amortization of net actuarial (gain)/loss
 
8,404

 
(2,017
)
 
6,387

 
6,362

 
(2,418
)
 
3,944

Regulatory adjustment
 
(7,560
)
 
1,814

 
(5,746
)
 
(5,734
)
 
2,179

 
(3,555
)
Pension plans other comprehensive income
 
1,178

 
(283
)
 
895

 
961

 
(365
)
 
596

FSIRS (designated hedging activities):
 
 
 
 
 
 
 
 
 
 
 
 
Amounts reclassified into net income
 
836

 
(200
)
 
636

 
835

 
(317
)
 
518

FSIRS other comprehensive income
 
836

 
(200
)
 
636

 
835

 
(317
)
 
518

Total other comprehensive income - Southwest Gas Corporation
 
2,014

 
(483
)
 
1,531

 
1,796

 
(682
)
 
1,114

Foreign currency translation adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
Translation adjustments
 
599

 
—

 
599

 
1,012

 
—

 
1,012

Foreign currency other comprehensive income (loss)
 
599

 
—

 
599

 
1,012

 
—

 
1,012

Total other comprehensive income - Southwest Gas Holdings, Inc.
 
$
2,613

 
$
(483
)
 
$
2,130

 
$
2,808

 
$
(682
)
 
$
2,126

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended
 
Nine Months Ended
 
 
September 30, 2018
 
September 30, 2017
 
 
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
 
$
1,002

 
$
(240
)
 
$
762

 
$
1,001

 
$
(380
)
 
$
621

Amortization of net actuarial (gain)/loss
 
25,212

 
(6,051
)
 
19,161

 
19,084

 
(7,252
)
 
11,832

Regulatory adjustment
 
(22,679
)
 
5,443

 
(17,236
)
 
(17,204
)
 
6,537

 
(10,667
)
Pension plans other comprehensive income
 
3,535

 
(848
)
 
2,687

 
2,881

 
(1,095
)
 
1,786

FSIRS (designated hedging activities):
 
 
 
 
 
 
 
 
 
 
 
 
Amounts reclassified into net income
 
2,509

 
(602
)
 
1,907

 
2,507

 
(953
)
 
1,554

FSIRS other comprehensive income
 
2,509

 
(602
)
 
1,907

 
2,507

 
(953
)
 
1,554

Total other comprehensive income - Southwest Gas Corporation
 
6,044

 
(1,450
)
 
4,594

 
5,388

 
(2,048
)
 
3,340

Foreign currency translation adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
Translation adjustments
 
(1,002
)
 
—

 
(1,002
)
 
1,861

 
—

 
1,861

Foreign currency other comprehensive income (loss)
 
(1,002
)
 
—

 
(1,002
)
 
1,861

 
—

 
1,861

Total other comprehensive income - Southwest Gas Holdings, Inc.
 
$
5,042

 
$
(1,450
)
 
$
3,592

 
$
7,249

 
$
(2,048
)
 
$
5,201

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Twelve Months Ended
 
Twelve Months Ended
 
 
September 30, 2018
 
September 30, 2017
 
 
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)
 
$
(43,027
)
 
$
10,326

 
$
(32,701
)
 
$
(22,770
)
 
$
8,652

 
$
(14,118
)
Amortization of prior service cost
 
1,336

 
(367
)
 
969

 
1,335

 
(507
)
 
828

Amortization of net actuarial (gain)/loss
 
31,573

 
(8,468
)
 
23,105

 
25,850

 
(9,823
)
 
16,027

Regulatory adjustment
 
6,865

 
(844
)
 
6,021

 
(4,420
)
 
1,679

 
(2,741
)
Pension plans other comprehensive income (loss)
 
(3,253
)
 
647

 
(2,606
)
 
(5
)
 
1

 
(4
)
FSIRS (designated hedging activities):
 
 
 
 
 
 
 
 
 
 
 
 
Amounts reclassified into net income
 
3,346

 
(920
)
 
2,426

 
3,344

 
(1,271
)
 
2,073

FSIRS other comprehensive income
 
3,346

 
(920
)
 
2,426

 
3,344

 
(1,271
)
 
2,073

Total other comprehensive income (loss) - Southwest Gas Corporation
 
93

 
(273
)
 
(180
)
 
3,339

 
(1,270
)
 
2,069

Foreign currency translation adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
Translation adjustments
 
(1,092
)
 
—

 
(1,092
)
 
1,408

 
—

 
1,408

Foreign currency other comprehensive income (loss)
 
(1,092
)
 
—

 
(1,092
)
 
1,408

 
—

 
1,408

Total other comprehensive income (loss) - Southwest Gas Holdings, Inc.
 
$
(999
)
 
$
(273
)
 
$
(1,272
)
 
$
4,747

 
$
(1,270
)
 
$
3,477

 
(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 September 30, 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 (loss) as of September 30, 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 (loss), 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 (loss), 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 (loss) at September 30, 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
 
—

 
—

 
—

 
—

 
—

 
—

 
(1,002
)
 
—

 
(1,002
)
 
—

 
(1,002
)
Other comprehensive income (loss) before reclassifications
 
—

 
—

 
—

 
—

 
—

 
—

 
(1,002
)
 
—

 
(1,002
)
 
—

 
(1,002
)
FSIRS amounts reclassified from AOCI (1)
 
—

 
—

 
—

 
2,509

 
(602
)
 
1,907

 
—

 
—

 
—

 
—

 
1,907

Amortization of prior service cost (2)
 
1,002

 
(240
)
 
762

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
762

Amortization of net actuarial loss (2)
 
25,212

 
(6,051
)
 
19,161

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
19,161

Regulatory adjustment (3)
 
(22,679
)
 
5,443

 
(17,236
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(17,236
)
Net current period other comprehensive income (loss) attributable to Southwest Gas Holdings, Inc.
 
3,535

 
(848
)
 
2,687

 
2,509

 
(602
)
 
1,907

 
(1,002
)
 
—

 
(1,002
)
 
—

 
3,592

Reclassification of excess deferred taxes (4)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(9,300
)
 
(9,300
)
Ending Balance AOCI September 30, 2018
 
$
(57,985
)
 
$
21,445

 
$
(36,540
)
 
$
(10,146
)
 
$
4,207

 
$
(5,939
)
 
$
(1,611
)
 
$
—

 
$
(1,611
)
 
$
(9,300
)
 
$
(53,390
)
 
(1)
The FSIRS reclassification amounts are included in Net interest deductions on the Company’s Condensed Consolidated Statements of Income.
(2)
These AOCI components are included in the computation of net periodic benefit cost (see Note 2 – Components of Net Periodic Benefit Cost for additional details).
(3)
The regulatory adjustment represents the portion of the activity above that is expected to be recovered through rates in the future (the related regulatory asset is included in Deferred charges and other assets on the Company’s Condensed Consolidated Balance Sheets).
(4)
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 September 30, 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)
 
—

 
—

 
—

 
2,509

 
(602
)
 
1,907

 
—

 
1,907

Amortization of prior service cost (7)
 
1,002

 
(240
)
 
762

 
—

 
—

 
—

 
—

 
762

Amortization of net actuarial loss (7)
 
25,212

 
(6,051
)
 
19,161

 
—

 
—

 
—

 
—

 
19,161

Regulatory adjustment (8)
 
(22,679
)
 
5,443

 
(17,236
)
 
—

 
—

 
—

 
—

 
(17,236
)
Net current period other comprehensive income attributable to Southwest Gas Corporation
 
3,535

 
(848
)
 
2,687

 
2,509

 
(602
)
 
1,907

 
—

 
4,594

Reclassification of excess deferred taxes (9)
 
—

 
—

 
—

 
—

 
—

 
—

 
(9,300
)
 
(9,300
)
Ending Balance AOCI September 30, 2018
 
$
(57,985
)
 
$
21,445

 
$
(36,540
)
 
$
(10,146
)
 
$
4,207

 
$
(5,939
)
 
$
(9,300
)
 
$
(51,779
)
 
(6)
The FSIRS reclassification amounts are included in Net interest deductions on Southwest’s Condensed Consolidated Statements of Income.
(7)
These AOCI components are included in the computation of net periodic benefit cost (see Note 2 – Components of Net Periodic Benefit Cost for additional details).
(8)
The regulatory adjustment represents the portion of the activity above that is expected to be recovered through rates in the future (the related regulatory asset is included in Deferred charges and other assets on Southwest’s Condensed Consolidated Balance Sheets).
(9)
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 September 30, 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 amounts (before income tax impacts) included in AOCI (in the tables above), that have not yet been recognized in net periodic benefit cost:
Amounts Recognized in AOCI (Before Tax)
(Thousands of dollars)
 
 
September 30, 2018
 
December 31, 2017
Net actuarial (loss) gain
 
$
(423,343
)
 
$
(448,555
)
Prior service cost
 
(3,366
)
 
(4,368
)
Less: amount recognized in regulatory assets
 
368,724

 
391,403

Recognized in AOCI
 
$
(57,985
)
 
$
(61,520
)