Southwest Gas (SWX) - 2025 Q2 - Quarterly Report

Form 10-Q Filing Information This report details the combined quarterly financial filing for Southwest Gas Holdings and its subsidiary, Southwest Gas Corporation, as of June 30, 2025 - This is a combined quarterly report (Form 10-Q) filed by Southwest Gas Holdings, Inc. and its wholly-owned subsidiary, Southwest Gas Corporation, for the period ended June 30, 2025[1][3] - As of July 25, 2025, Southwest Gas Holdings, Inc. had 71,979,296 shares of common stock outstanding. All outstanding common stock of Southwest Gas Corporation was held by Southwest Gas Holdings, Inc.[2] | Registrant | File Number | State of Incorporation | Employer Identification No. | | :-------------------------- | :---------- | :--------------------- | :-------------------------- | | Southwest Gas Holdings, Inc. | 001-37976 | Delaware | 81-3881866 | | Southwest Gas Corporation | 1-7850 | California | 88-0085720 | Glossary of Key Terms This section provides definitions for important terms used throughout the financial report Forward-Looking Statements This section outlines the forward-looking nature of the report's statements and identifies key risk factors that could impact actual results - The report contains forward-looking statements subject to the safe harbor protection of the Private Securities Litigation Reform Act of 1995, covering plans, objectives, goals, intentions, projections, strategies, future events, and performance[7][8] - Important factors that could cause actual results to differ materially include customer growth rates, housing market conditions, inflation, interest rates, regulatory policies, and the ongoing Centuri separation[9][10] Part I - Financial Information This part presents the comprehensive financial data, including statements and detailed notes, for both Southwest Gas Holdings and Southwest Gas Corporation ITEM 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for Southwest Gas Holdings, Inc. and its subsidiaries, and Southwest Gas Corporation and its subsidiaries, for the quarter and six months ended June 30, 2025, and comparative periods. It includes balance sheets, statements of income, comprehensive income, cash flows, and equity, with combined notes for both entities Southwest Gas Holdings, Inc. and Subsidiaries This section presents the unaudited condensed consolidated financial statements for Southwest Gas Holdings, Inc. and its subsidiaries Condensed Consolidated Balance Sheets This table provides a snapshot of Southwest Gas Holdings' assets, liabilities, and equity at specific reporting dates Southwest Gas Holdings, Inc. and Subsidiaries - Balance Sheet Highlights (Thousands of dollars): | Item | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Total assets | $12,213,945 | $12,023,836 | | Total equity | $4,115,805 | $3,681,422 | | Long-term debt, less current maturities | $4,396,867 | $4,348,340 | | Short-term debt | $260,000 | $680,000 | Condensed Consolidated Statements of Income This table details Southwest Gas Holdings' revenues, expenses, and net income over specified quarterly and year-to-date periods Southwest Gas Holdings, Inc. and Subsidiaries - Income Statement Highlights (Thousands of dollars, except per share): | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total operating revenues | $1,120,370 | $1,182,168 | $2,416,867 | $2,763,124 | | Operating income | $95,456 | $83,221 | $295,878 | $241,346 | | Net income (loss) attributable to SWX | $(12,883) | $18,333 | $100,987 | $106,070 | | Basic earnings (loss) per share | $(0.18) | $0.26 | $1.40 | $1.48 | Condensed Consolidated Statements of Comprehensive Income This table presents Southwest Gas Holdings' comprehensive income, including net income and other comprehensive income items Southwest Gas Holdings, Inc. and Subsidiaries - Comprehensive Income Highlights (Thousands of dollars): | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Comprehensive income (loss) attributable to SWX | $(6,970) | $17,736 | $107,252 | $103,038 | Condensed Consolidated Statements of Cash Flows This table summarizes Southwest Gas Holdings' cash inflows and outflows from operating, investing, and financing activities Southwest Gas Holdings, Inc. and Subsidiaries - Cash Flow Highlights (Thousands of dollars): | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $417,611 | $850,285 | | Net cash used in investing activities | $(396,015) | $(425,887) | | Net cash provided by (used in) financing activities | $(30,008) | $68,944 | | Cash and cash equivalents at end of period | $355,627 | $599,639 | Condensed Consolidated Statements of Equity This table outlines changes in Southwest Gas Holdings' total equity over the reporting periods Southwest Gas Holdings, Inc. and Subsidiaries - Equity Highlights (Thousands of dollars): | Item | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Total equity | $4,115,805 | $3,681,422 | Southwest Gas Corporation and Subsidiaries This section presents the unaudited condensed consolidated financial statements for Southwest Gas Corporation and its subsidiaries Condensed Consolidated Balance Sheets This table provides a snapshot of Southwest Gas Corporation's assets, liabilities, and equity at specific reporting dates Southwest Gas Corporation and Subsidiaries - Balance Sheet Highlights (Thousands of dollars): | Item | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Total assets | $9,688,433 | $9,533,955 | | Total equity | $3,408,373 | $3,271,862 | | Long-term debt, less current maturities | $3,506,237 | $3,504,477 | Condensed Consolidated Statements of Income This table details Southwest Gas Corporation's revenues, expenses, and net income over specified quarterly and year-to-date periods Southwest Gas Corporation and Subsidiaries - Income Statement Highlights (Thousands of dollars): | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Regulated operations revenues | $396,318 | $510,093 | $1,142,734 | $1,563,026 | | Operating income | $65,342 | $55,072 | $280,321 | $239,416 | | Net income | $33,677 | $27,594 | $176,619 | $163,419 | Condensed Consolidated Statements of Comprehensive Income This table presents Southwest Gas Corporation's comprehensive income, including net income and other comprehensive income items Southwest Gas Corporation and Subsidiaries - Comprehensive Income Highlights (Thousands of dollars): | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Comprehensive income | $33,944 | $27,980 | $177,154 | $164,189 | Condensed Consolidated Statements of Cash Flows This table summarizes Southwest Gas Corporation's cash inflows and outflows from operating, investing, and financing activities Southwest Gas Corporation and Subsidiaries - Cash Flow Highlights (Thousands of dollars): | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $459,287 | $951,694 | | Net cash used in investing activities | $(352,908) | $(374,707) | | Net cash used in financing activities | $(94,415) | $(83,247) | | Cash and cash equivalents at end of period | $323,037 | $564,894 | Condensed Consolidated Statements of Equity This table outlines changes in Southwest Gas Corporation's total equity over the reporting periods Southwest Gas Corporation and Subsidiaries - Equity Highlights (Thousands of dollars): | Item | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Total equity | $3,408,373 | $3,271,862 | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures regarding the company's accounting policies, financial instruments, segment performance, and significant events like the Centuri separation, offering context to the condensed financial statements Note 1 – Background and Organization This note describes the corporate structure of Southwest Gas Holdings, including its subsidiaries and recent changes in ownership - Southwest Gas Holdings, Inc. is a holding company for Southwest Gas Corporation (natural gas distribution) and, until April 22, 2024, Centuri (utility infrastructure services)[38] - Centuri completed an IPO in April 2024. Following secondary public offerings and a private placement in May and June 2025, Southwest Gas Holdings' ownership in Centuri decreased to 53.3% at June 30, 2025, and 52.1% in July 2025. Centuri remains consolidated[40] Note 2 – Summary of Significant Accounting Policies This note outlines the key accounting principles and estimates used in preparing the financial statements, including goodwill and tax rates - The condensed consolidated financial statements are prepared in accordance with SEC rules and U.S. GAAP, involving management estimates and assumptions[41][42] - Goodwill is assessed for impairment annually as of October 1, or more frequently if circumstances indicate. No impairment was deemed to have occurred in the continuing segments during the first six months of 2025[47] - The Company's effective tax rate was 124.4% for Q2 2025 (vs 17.1% in Q2 2024) and 44.8% for YTD 2025 (vs 16.5% in YTD 2024), primarily due to pre-tax income differences, amortization of excess deferred income taxes, non-deductible Centuri IPO costs, and the sale of Centuri shares[51] - Southwest Gas' effective tax rate was 12.3% for Q2 2025 (vs 6.3% in Q2 2024) and 19.0% for YTD 2025 (vs 16.4% in YTD 2024), mainly due to pre-tax income differences and amortization of excess deferred income taxes[52] Goodwill by Segment (Thousands of dollars): | Segment | December 31, 2024 | June 30, 2025 | | :-------------------------- | :---------------- | :------------ | | Natural Gas Distribution | $11,155 | $11,155 | | Utility Infrastructure Services | $770,046 | $775,349 | | Total Company | $781,201 | $786,504 | Note 3 – Components of Net Periodic Benefit Cost This note details the various components contributing to Southwest Gas's net periodic benefit costs for employee benefit plans Southwest Gas' Net Periodic Benefit Cost (Thousands of dollars): | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | QRP Net periodic benefit cost | $667 | $1,784 | $1,332 | $3,568 | | SERP Net periodic benefit cost | $924 | $936 | $1,848 | $1,872 | | PBOP Net periodic benefit cost | $490 | $596 | $980 | $1,191 | Note 4 – Revenue This note provides a breakdown of revenues by customer type for regulated operations and by service type for utility infrastructure services - Centuri's contract assets (revenue earned in excess of billings) increased by $80.3 million from December 31, 2024, to June 30, 2025, due to incremental work performed where billing milestones were not yet met[66] - Centuri utilizes a $125 million Securitization Facility with PNC, selling trade accounts receivable and contract assets to enhance liquidity. As of June 30, 2025, $125 million was outstanding, with no unused capacity[71][72][73] Southwest Gas - Regulated Operations Revenues by Customer Type (Thousands of dollars): | Customer Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Residential | $238,844 | $310,552 | $800,483 | $1,094,789 | | Small commercial | $72,024 | $110,640 | $202,389 | $317,085 | | Large commercial | $17,921 | $29,310 | $39,636 | $67,326 | | Industrial/other | $10,669 | $15,471 | $24,141 | $36,294 | | Transportation | $29,403 | $26,673 | $58,969 | $55,360 | | Total Regulated operations revenues | $396,318 | $510,093 | $1,142,734 | $1,563,026 | Centuri - Utility Infrastructure Services Revenues by Service Type (Thousands of dollars): | Service Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Gas infrastructure services | $391,945 | $387,352 | $629,423 | $654,909 | | Electric power infrastructure services | $332,107 | $284,723 | $644,710 | $545,189 | | Total Utility infrastructure services revenues | $724,052 | $672,075 | $1,274,133 | $1,200,098 | Note 5 – Debt This note details the company's long-term debt, credit facilities, and recent debt refinancing and prepayment activities - Southwest Gas amended its $400 million revolving credit facility, extending maturity to August 2029 and adding a swingline loan sub-facility. No borrowings were outstanding at June 30, 2025[75] - Centuri amended its credit agreement in July 2025, refinancing its term loan to $800 million (maturity July 2032) and increasing its revolving credit facility to $450 million (maturity July 2030)[76][178][179] - Southwest Gas Holdings entered a new $300 million revolving credit agreement maturing in August 2029. $35.0 million was outstanding at June 30, 2025[77][78] - Southwest Gas Holdings prepaid $325.0 million of its $550 million term loan using Centuri separation proceeds, reducing the balance to $225 million and extending its maturity to June 2026[79] Long-Term Debt (Thousands of dollars): | Item | June 30, 2025 (Carrying Amount) | December 31, 2024 (Carrying Amount) | | :--------------------------------------- | :------------------------------ | :-------------------------------- | | Southwest Gas Corporation total long-term debt | $3,506,237 | $3,504,477 | | Southwest Gas Holdings, Inc. total long-term debt, less current maturities | $4,396,867 | $4,348,340 | Note 6 – Segment Information This note provides financial performance data segmented by natural gas distribution and utility infrastructure services, including revenues and assets - The Company operates in two reportable segments: natural gas distribution (Southwest Gas) and utility infrastructure services (Centuri)[81] Total Segment Revenue by Geographic Area (Thousands of dollars): | Geographic Area | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | United States | $1,065,261 | $1,135,502 | $2,321,973 | $2,675,478 | | Canada | $55,109 | $46,666 | $94,894 | $87,646 | | Total | $1,120,370 | $1,182,168 | $2,416,867 | $2,763,124 | Segment Performance (Three Months Ended June 30, 2025, Thousands of dollars): | Item | Natural Gas Operations | Utility Infrastructure Services | Other | Total | | :--------------------------------------- | :--------------------- | :------------------------------ | :---- | :---------- | | Total segment revenue | $396,318 | $724,052 | $— | $1,120,370 | | Income (loss) before income taxes | $38,411 | $14,266 | $(10,412) | $42,265 | | Net income (loss) attributable to SWX | $33,677 | $5,771 | $(52,331) | $(12,883) | | Segment assets | $9,688,433 | $2,513,389 | $12,123 | $12,213,945 | | Capital expenditures | $199,323 | $20,800 | $— | $220,123 | Segment Performance (Six Months Ended June 30, 2025, Thousands of dollars): | Item | Natural Gas Operations | Utility Infrastructure Services | Other | Total | | :--------------------------------------- | :--------------------- | :------------------------------ | :---- | :---------- | | Total segment revenue | $1,142,734 | $1,274,133 | $— | $2,416,867 | | Income (loss) before income taxes | $218,061 | $(16,790) | $(22,150) | $179,121 | | Net income (loss) attributable to SWX | $176,619 | $(14,197) | $(61,435) | $100,987 | | Segment assets | $9,688,433 | $2,513,389 | $12,123 | $12,213,945 | | Capital expenditures | $362,457 | $45,162 | $— | $407,619 | Note 7 - Centuri Separation This note details the Centuri IPO, subsequent stock offerings, debt repayment, and the tax implications of Centuri's deconsolidation - Following the Centuri IPO in April 2024, Southwest Gas Holdings completed secondary public offerings and a private placement of Centuri common stock in May and June 2025, generating approximately $448.7 million in net proceeds used for debt repayment[99][100][101] - As of June 30, 2025, Southwest Gas Holdings owned 53.3% of Centuri, further reduced to 52.1% in July 2025 after an additional private placement. The Company intends to fully dispose of its Centuri ownership[40][102][106] - Tax deconsolidation of Centuri in Q2 2025 resulted in a net charge of approximately $45.4 million to income tax expense, including a previously unrecorded deferred tax liability and state income tax deferred tax assets[103][104] ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance, operational highlights, and future outlook, focusing on the natural gas distribution and utility infrastructure services segments, the regulatory environment, and liquidity. It details the impact of rate changes, customer growth, and the Centuri separation Executive Summary This summary highlights key financial results, strategic actions like the Centuri stock offerings, and operational performance across segments - Southwest Gas Holdings completed secondary public offerings and private placements of Centuri stock, generating $448.7 million in net proceeds, with an additional $22.0 million in July 2025, all used to repay outstanding indebtedness[117] - The Company finished Q2 2025 with approximately $356 million of cash on a consolidated basis and no longer expects to issue equity in 2025[117] - Natural gas distribution segment saw 40,000 first-time meter sets over the past 12 months, representing a 1.8% growth rate, and $362.5 million in capital investment year-to-date[117] - Utility infrastructure services revenues increased by $52 million (8%) to $724.1 million in Q2 2025 compared to Q2 2024[117] Summary Operating Results (Thousands of dollars, except per share): | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Natural gas distribution net income | $33,677 | $27,594 | $176,619 | $163,419 | | Utility infrastructure services net income | $5,771 | $5,054 | $(14,197) | $(31,176) | | Corporate and administrative net income (loss) | $(52,331) | $(14,315) | $(61,435) | $(26,173) | | Consolidated Net income (loss) | $(12,883) | $18,333 | $100,987 | $106,070 | | Basic earnings per share | $(0.18) | $0.26 | $1.40 | $1.48 | | Natural Gas Distribution Operating margin | $294,184 | $267,614 | $756,021 | $690,550 | Results of Natural Gas Distribution The natural gas distribution segment's results improved due to increased operating margin from rate relief and customer growth, partially offset by higher operations and maintenance expenses, depreciation, and net interest deductions Quarterly Analysis This analysis reviews the natural gas distribution segment's financial performance for the three months ended June 30, 2025, compared to the prior year - Operating margin increased by $26.6 million, driven by $23.7 million from combined rate relief and $2.5 million from customer growth (40,000 first-time meter sets over 12 months)[120] - Operations and maintenance expense rose by $7.0 million (5%), primarily due to increased employee-related labor and benefit costs ($5 million) and external contractor services[121] - Depreciation and amortization expense increased by $7.3 million (12%), reflecting a $733.0 million (7%) increase in average gas plant in service[122] - Other income increased by $3.6 million, mainly from a $4.5 million increase in COLI policy values and a $1.6 million gain on asset sales, partially offset by a $3.3 million decrease in interest income due to reduced carrying charges on regulatory account balances[123] Natural Gas Distribution - Q2 Performance (Thousands of dollars): | Item | June 30, 2025 | June 30, 2024 | Change | | :-------------------------- | :------------ | :------------ | :----- | | Regulated operations revenues | $396,318 | $510,093 | $(113,775) | | Net cost of gas sold | $102,134 | $242,479 | $(140,345) | | Operating margin | $294,184 | $267,614 | $26,570 | | Operations and maintenance expense | $136,652 | $129,627 | $7,025 | | Depreciation and amortization | $68,940 | $61,687 | $7,253 | | Operating income | $65,342 | $55,072 | $10,270 | | Net income | $33,677 | $27,594 | $6,083 | Six-Month Analysis This analysis reviews the natural gas distribution segment's financial performance for the six months ended June 30, 2025, compared to the prior year - Operating margin increased by $65.5 million, primarily from $51.1 million in rate relief and $7.6 million from customer growth[126] - Operations and maintenance expense increased by $5.6 million (2%), mainly due to higher employee-related costs ($4 million) and insurance costs ($2.3 million)[127] - Depreciation and amortization expense increased by $16.1 million (11%), reflecting a $736.0 million (7%) increase in average gas plant in service[128] - Other income decreased by $5.2 million, mainly due to a $7.3 million decline in interest income from reduced carrying charges on deferred purchased gas cost balances[129] Natural Gas Distribution - YTD Performance (Thousands of dollars): | Item | June 30, 2025 | June 30, 2024 | Change | | :-------------------------- | :------------ | :------------ | :----- | | Regulated operations revenues | $1,142,734 | $1,563,026 | $(420,292) | | Net cost of gas sold | $386,713 | $872,476 | $(485,763) | | Operating margin | $756,021 | $690,550 | $65,471 | | Operations and maintenance expense | $266,059 | $260,493 | $5,566 | | Depreciation and amortization | $162,630 | $146,510 | $16,120 | | Operating income | $280,321 | $239,416 | $40,905 | | Net income | $176,619 | $163,419 | $13,200 | Results of Utility Infrastructure Services The utility infrastructure services segment experienced revenue growth, primarily in electric services, but profitability was impacted by increased general and administrative costs, including non-recurring separation-related expenses and higher incentive compensation Quarterly Analysis This analysis reviews the utility infrastructure services segment's financial performance for the three months ended June 30, 2025, compared to the prior year - Revenues increased by $52.0 million (8%), driven by a $47.4 million increase in electric utility infrastructure services and a $4.6 million increase in gas utility infrastructure services[131] - Operating margin decreased due to a $9.1 million increase in general and administration costs, including $2.9 million in non-recurring Centuri separation costs and higher incentive compensation[132] - Net interest deductions decreased by $4.4 million, primarily due to a reduction in average debt balance and lower interest rates on variable-rate borrowings[133] Utility Infrastructure Services - Q2 Performance (Thousands of dollars): | Item | June 30, 2025 | June 30, 2024 | Change | | :--------------------------------------- | :------------ | :------------ | :----- | | Utility infrastructure services revenues | $724,052 | $672,075 | $51,977 | | Utility infrastructure services expenses | $657,671 | $604,545 | $53,126 | | Operating income | $32,158 | $33,145 | $(987) | | Net income | $8,325 | $6,931 | $1,394 | Six-Month Analysis This analysis reviews the utility infrastructure services segment's financial performance for the six months ended June 30, 2025, compared to the prior year - Revenues increased by $74.0 million (6%), driven by a $99.5 million increase in electric utility infrastructure services, partially offset by a $25.5 million decrease in gas utility infrastructure services due to adverse weather and project delays[136] - General and administrative costs increased by $7.7 million, including $4.6 million in separation-related and non-recurring professional fees, and higher stock-based and other incentive compensation[138] - Net interest deductions decreased by $10.6 million, primarily due to a reduction in average debt balance and lower interest rates on variable-rate borrowings[139] Utility Infrastructure Services - YTD Performance (Thousands of dollars): | Item | June 30, 2025 | June 30, 2024 | Change | | :--------------------------------------- | :------------ | :------------ | :----- | | Utility infrastructure services revenues | $1,274,133 | $1,200,098 | $74,035 | | Utility infrastructure services expenses | $1,186,242 | $1,120,188 | $66,054 | | Operating income | $19,445 | $11,206 | $8,239 | | Net loss | $(16,326) | $(29,474) | $13,148 | Rates and Regulatory Proceedings This section details Southwest Gas's ongoing and recently concluded regulatory activities across its Arizona, Nevada, California, and FERC jurisdictions, including general rate cases, adjustment mechanisms, and PGA filings, outlining their financial implications and operational impacts Arizona Jurisdiction This section details regulatory approvals and rate adjustments within Southwest Gas's Arizona service territory - The ACC approved an annual rate increase of approximately $80.2 million and a 9.84% return on common equity in March 2025, following Southwest Gas's 2024 Arizona rate case application[141][142] - The Infrastructure System Integrity Mechanism (SIM) was approved with an annual investment limit of $50 million, allowing recovery of revenue requirements for eligible plant[143] - A PGA Modification was approved, implementing a credit rate of $0.08138 per therm effective April 1, 2025, to reduce the over-collected GCBA balance[146] Nevada Jurisdiction This section details regulatory approvals and rate adjustments within Southwest Gas's Nevada service territory - The PUCN approved an annual revenue increase of $59 million and a 9.5% return on common equity in April 2024, affirming full revenue decoupling and tracking of incremental leak survey costs[147] - The PUCN approved regulatory accounting treatment for line locate activity expenses, effective January 1, 2025, to stem financial attrition between rate cases[149][150] - A DEAA Modification was approved, implementing significant PGA credits ($0.20000/therm for southern Nevada, $0.25000/therm for northern Nevada) effective July 1, 2025, to address over-collected balances[151] California Jurisdiction This section details Southwest Gas's ongoing general rate case and proposed revenue increases within its California service territory - Southwest Gas's 2024 California general rate case proposes a statewide revenue increase of approximately $43.7 million for a 2026 test year, with a requested 11.35% return on common equity[152] - A partial settlement was reached with Cal Advocates, with outstanding issues (capital structure, return on equity) litigated in July 2025, and new rates expected in January 2026[152] FERC Jurisdiction This section outlines regulatory outcomes for Great Basin's general rate case and the results of its expansion project's open season - Great Basin's general rate case resulted in an approved $9.6 million annual revenue increase based on a 9.76% pretax rate of return, with rates effective September 6, 2024, subject to refund[154][155] - The 2028 Expansion Project's Binding Open Season resulted in potential incremental capacity of up to ~1.76 Bcf of demand per day[156] PGA Filings This section details the status of Southwest Gas's purchased gas adjustment (PGA) balancing accounts and customer refunds - As of June 30, 2025, Southwest Gas had an over-collection in its PGA balancing accounts of $349.0 million, which will be refunded to customers[157][173] Southwest Gas' Outstanding PGA Balances (Thousands of dollars): | Jurisdiction | June 30, 2025 | December 31, 2024 | June 30, 2024 | | :------------------- | :------------ | :---------------- | :------------ | | Arizona | $(64,332) | $(46,980) | $31,510 | | Nevada | $(282,944) | $(195,279) | $(121,323) | | California | $(1,755) | $13,937 | $8,267 | | Total | $(349,031) | $(228,322) | $(81,546) | Capital Resources and Liquidity This section assesses the company's cash flow, capital expenditures, debt management, and dividend policy, along with factors influencing future liquidity, emphasizing the impact of PGA balances and the Centuri separation Cash Flows This section analyzes the consolidated and segment-specific cash flow changes from operating, investing, and financing activities - Consolidated operating cash flows decreased by $432.7 million in YTD 2025 compared to YTD 2024, primarily due to a substantial reduction in the collection of previously deferred purchased gas costs[161][162] - Consolidated investing cash flows decreased by $29.9 million in YTD 2025, driven by reduced construction expenditures and property additions[163] - Consolidated financing cash flows decreased by $99.0 million in YTD 2025, mainly due to a $325.0 million prepayment on Southwest Gas Holdings' term loan and a $95.0 million paydown on its revolving credit facility, utilizing Centuri stock sale proceeds[164] - Southwest Gas Corporation's operating cash flows decreased by approximately $492.4 million in YTD 2025, also primarily due to the reduction in deferred purchased gas cost collections[166] Natural Gas Distribution Segment Construction Expenditures, Debt Maturities, and Financing This section outlines planned capital investments, debt obligations, and funding strategies for the natural gas distribution segment - Construction expenditures for the natural gas distribution segment were $362.5 million for the six months ended June 30, 2025[169] - Estimated natural gas segment construction expenditures for the three-year period ending December 31, 2027, are approximately $2.6 billion, with $880.2 million expected in 2025[170] - Approximately 74% of funding for gas operations, construction, and dividends is expected from operating cash flows, with additional needs met by existing credit facilities, parent equity, and external financing[170] Dividend Policy This section states the company's current quarterly dividend and its intention to reevaluate the policy post-Centuri separation - The Board maintained the quarterly dividend at $0.62 per share, effective June 2025, and intends to reevaluate the dividend upon completion of the Centuri separation[171] Liquidity This section discusses factors influencing the company's ability to meet short-term and long-term financial obligations, including credit facilities and debt - Key factors affecting future liquidity include the Centuri separation, natural gas price variability, regulatory policies, access to capital, interest rates, and PGA balances[172] - Southwest Gas Holdings has a new $300 million revolving credit agreement maturing in August 2029, with $35.0 million outstanding at June 30, 2025[174] - Southwest Gas has a $400 million revolving credit facility (maturing August 2029) for liquidity and working capital, with no outstanding borrowings at June 30, 2025[176] - Centuri's multi-currency facility was amended in July 2025, increasing its senior secured revolving credit facility to $450 million and extending its maturity to July 2030[178][179] Critical Accounting Policies and Estimates This section confirms no significant changes to the company's critical accounting policies and estimates since the last annual report - There have been no significant changes to the critical accounting policies and estimates disclosed in the 2024 Annual Report on Form 10-K[181] ITEM 3. Quantitative and Qualitative Disclosures About Market Risk This section states that there have been no material changes to the company's market risk disclosures since its 2024 Annual Report on Form 10-K - No material changes have occurred related to market risk disclosures since December 31, 2024[182] ITEM 4. Controls and Procedures Management of Southwest Gas Holdings, Inc. and Southwest Gas confirms the effectiveness of their disclosure controls and procedures as of June 30, 2025, and reports no material changes in internal control over financial reporting during the second quarter of 2025 - Disclosure controls and procedures for both Southwest Gas Holdings, Inc. and Southwest Gas are deemed effective as of June 30, 2025[184] - No material changes in internal control over financial reporting occurred during the second quarter of 2025[185] Part II - Other Information This part contains additional disclosures not covered in the financial statements, including legal proceedings and risk factors ITEM 1. Legal Proceedings Management believes that none of the various legal proceedings in which the Company and Southwest Gas are named defendants will individually or in the aggregate have a material adverse impact on their financial position or results of operations - Management believes current legal proceedings will not have a material adverse impact on the Company's or Southwest Gas' financial position or results of operations[187] ITEM 1A. Risk Factors This section confirms that there have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to the risk factors previously disclosed in the 2024 Annual Report on Form 10-K as of June 30, 2025[188] ITEM 2 through 3. None. This item indicates no information to report for these sections ITEM 4. Mine Safety Disclosures This item is not applicable to the company's operations - Mine Safety Disclosures are not applicable to the registrant[189] ITEM 5. Other Information This item reports on director and officer trading arrangements during the fiscal quarter - No directors or Section 16 officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2025[189] ITEM 6. Exhibits This section lists all documents filed as exhibits to the Form 10-Q, including various stock purchase agreements, credit agreements, certifications, and XBRL data - Key exhibits filed include Common Stock Purchase Agreements (May 19, 2025, June 13, 2025), Second Amended and Restated Term Loan Credit Agreement (June 27, 2025), Revolving Credit Agreement (June 27, 2025), and First Amendment to Credit Agreement (June 27, 2025)[190] - Section 302 and 906 Certifications for both Southwest Gas Holdings, Inc. and Southwest Gas Corporation are filed[190] - Financial statements for both registrants are formatted in Inline XBRL (Extensible Business Reporting Language)[190] Signatures This section contains the required signatures for the Form 10-Q filing