Roy R.
Centrella, Vice
President/Controller/Chief Accounting Officer
September
15, 2008
H.
Christopher Owings
Assistant
Director
Division
of Corporation Finance
United
States Securities and Exchange Commission
Mail Stop
3561
Washington,
D.C. 20549-7010
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Re:
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Southwest
Gas Corporation
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Form
10-K
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Filed
February 29, 2008
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Definitive
Proxy Statement on Schedule 14A
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Filed
March 28, 2008
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File
No. 001-07850
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Dear Mr. Owings:
On behalf
of Southwest Gas Corporation (the “Company”), this
letter is being submitted in response to comments received from the Staff of the
Securities and Exchange Commission (the “SEC”) by letter dated
August 14, 2008 with respect to the Company’s Form 10-K for the year ended
December 31, 2007 filed with the SEC on February 29, 2008 (the “Form 10-K”) and
the Company’s definitive proxy statement on Schedule 14A filed with the SEC on
March 28, 2008 (the “Proxy
Statement”). The numbering of the paragraphs below corresponds
to the numbering of the Staff’s letter, the text of which we have incorporated
into this response letter for convenience.
Annual Report on Form 10-K
for Fiscal Year Ended December 31, 2007
Item 1. Business, page
1
Competition, page
4
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1.
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Please
disclose the principal method or methods of competition in your
construction services segment. Refer to Item 101(c)(1)(x) of
Regulation S-K.
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5241
Spring Mountain Road / Las Vegas, Nevada 89150-0002
P.O. Box
98510 / Las Vegas, Nevada 89193-8510 / (702) 876-7083
www.swgas.com
H.
Christopher Owings
United
States Securities and Exchange Commission
September
15, 2008
Page 2 of 16
Response:
In future
10-K filings, the “competition” paragraph for our construction services segment
(currently on page 5 of the 2007 Form 10-K) will be updated to include the
principal method or methods of competition for our construction services
segment.
Item 15. Exhibits, Financial
Statement Schedules, page 17
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2.
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Please
file all exhibits required by Item 601(b) of Regulation
S-K. Although not intended to be an exhaustive list, we note
that your exhibit list does not include (1) the indenture related to the
2003A Series, 2003B Series, 2003C Series, 2003D Series and 2003E Series
IDRBs, (2) the 1996 Stock Incentive Plan and (3) the form of stock option
grant under the 1996 Stock Incentive
Plan.
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Response:
The
indenture related to the 2003A Series, 2003B Series, 2003C Series, 2003D Series,
and 2003E Series IDRBs, as applicable, will be filed with the third quarter 2008
Form 10-Q and the subsequent Form 10-K exhibit index will be updated
accordingly. The financing agreements for these IDRBs, which contain
the same information as the indenture and include our obligations, were filed
with the Form 10-Q for the quarter ended September 30, 2003.
The 1996
Stock Incentive Plan was filed with the SEC as Appendix C to the 1996 Proxy
Statement. The 1996 Stock Incentive Plan (including a reference to
the 1996 Proxy Statement) was listed in the 10-K exhibit listing for each year
through 2001. The 2002 Stock Incentive Plan took the place of the
1996 Stock Incentive Plan and at that time the 1996 Stock Incentive Plan was
removed from the exhibit index in the Form 10-K. In the 2008 Form
10-K we will add back the 1996 Stock Incentive Plan to the exhibit index (and
incorporate the document as filed in the 1996 Proxy Statement). As
indicated in our filings, we no longer grant stock options under either
plan.
Exhibit 13. Portions of 2007
Annual Report to Shareholders
Management’s Discussion and
Analysis of Financial Condition and Results of Operations, page
36
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3.
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It
appears that the classification of certain expenses in your tables of
results of natural gas operations on page 38 and results of construction
services on page 46 differ from the classifications in your financial
statements. Yet, you disclose in note 12 to your financial
statements that
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H.
Christopher Owings
United
States Securities and Exchange Commission
September
15, 2008
Page 3 of 16
the
accounting policies of the reported segments are the same as those described in
note 1 – summary of significant accounting policies. Please advise in
detail. Please reconcile your disclosure of segment expenses to the
amounts in your consolidated statements of income for each year presented and
disclose differences in classification in note 12 to your financial
statements. Also disclose the nature of expenses classified in the
various line items in the consolidated statements of income in your description
of significant accounting policies in note 1 to your consolidated financial
statements. Finally, providing a consolidating summary of your
segment results reconciled to the amounts presented in your consolidated
statements of income in your discussion and analysis of operations in future
filings may be useful to investors.
Response:
The
accounting policies of the reported segments are the same as those described in
Note 1 – Summary of Significant Accounting Policies. The
classification of expenses for the natural gas operations segment on page 38
utilizes the same expense line items as the consolidated statements of
income. However, the line items used to classify expenses for the
stand-alone construction services segment table on page 46 were modified based
on classifications commonly used in the construction industry (e.g., including
equipment depreciation with cost of construction, breaking out general and
administrative expenses, etc.). (See Appendix A for reconciliations
of these line item amounts to the consolidated income statement
presentation.) In future 10-K filings, we will disclose the
stand-alone results of operations for the construction services segment using
the same classifications included in the consolidated income statements, as
applicable. This change will eliminate differences between the
results of operations tables and Note 12. We believe these changes
will negate the need for presenting a consolidating schedule, but we will
consider including such a schedule at year-end. In future Form 10-K
filings, we will add descriptions to Note 1 of the nature of expenses contained
in “Operations and maintenance” and “Construction expenses”.
Executive Summary, page
36
Summary Operating Results,
page 37
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4.
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It
appears that basic earnings per share of your natural gas operations and
construction services segments represent non-GAAP measures. As
such, please disclose how these measures are used by management and in
what way they provide meaningful information to
investors. Refer to Item 10(e)(1)(i) of Regulation S-K and
Question 11 of frequently Asked
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H.
Christopher Owings
United
States Securities and Exchange Commission
September
15, 2008
Page 4 of
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Questions
Regarding the Use of Non-GAAP Financial Measures (the “Non-GAAP FAQ”) available
on our website at http://sec.gov/divisions/corpfin/faqs/nongaapfaq.htm.
Response:
The basic
earnings per share of the natural gas operations and construction services
segments were provided so investors could easily determine how each segment
performed during the reported periods on a relative basis. It is
merely a mathematical calculation of net income (for each segment) divided by
the weighted-average outstanding common shares. This disclosure will
be eliminated in future 10-Q and 10-K filings, or identified as a non-GAAP
measure and disclosed in accordance with applicable requirements.
Results of Natural Gas
Operations, page 38
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5.
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Where
you describe two or more factors that contributed to a material change in
a financial statement line item between periods, please quantify, to the
extent practicable, the incremental impact of each factor
identified. For example, please quantify the effect of higher
uncollectible expenses in your discussion of operations and maintenance
expense, the favorable property tax adjustment in your discussion of
general taxes and the reduction in interest income and the increase in net
financing costs associated with PGA clauses in your discussions of other
income and net financing costs for 2007 versus 2006. See Item
303(a) of Regulation S-K and Financial Reporting Codification
501.04.
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Response:
We will
include quantifications, to the extent practicable, of two or more factors that
contributed to a material change in a financial statement line item between
periods in future filings. Referencing the examples above, the effect
of higher uncollectible expenses was an increase to operations and maintenance
expense of $1.4 million ($7.2 million in 2007 vs. $5.8 million in
2006). The favorable property tax adjustment was approximately $3.7
million in 2006 (relating to tax years 2001 to 2005). Interest income
relating to PGA clauses was $3.5 million in 2007 and $5.9 million in 2006 (a
decrease of $2.4 million). Interest expense associated with PGA
clauses was approximately $2 million in 2007 vs. $13,000 in 2006.
H.
Christopher Owings
United
States Securities and Exchange Commission
September
15, 2008
Page 5 of
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Capital Resources and
Liquidity, page 42
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6.
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It
appears that the measure of cash flows from operating activities of
Southwest, net of dividends, represents a non-GAAP financial
measure. As such, please revise to provide the disclosures
required by Item 10(e)(1)(i) of Regulation
S-K.
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Response:
These
disclosures will be revised in future 10-Q and 10-K filings to eliminate the
term “net of dividends” and the amounts and percentages will be recalculated
accordingly.
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7.
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Please
tell us your consideration of providing a discussion and analysis of
capital resources and liquidity of your construction services segment and
of the business as a whole. In addition, please include a
discussion of any known trends or any known demands, commitments, events
or uncertainties that will result in or that are reasonably likely to
result in your liquidity increasing or decreasing in any material
way. In that regard, it may be necessary to include a
discussion and analysis of operating, investing and financing cash flows
for the three-year period covered by the financial
statements. Please advise. Refer to the requirements
of Item 303(a) of Regulation S-K.
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Response:
As stated
on page 42 of the Company’s 2007 Annual Report, “The capital requirements and
resources of the Company are determined independently for the natural gas
operations and construction services segments. The capital
requirements and resources of the construction services segment are not material
to the overall capital requirements and resources of the
Company.” For example, in 2007 net consolidated operating cash
inflows were $348 million, of which $317 million (91%) were from the
natural gas segment. Net consolidated investing cash outflows during
2007 were $332 million, of which $306 million (92%) related to the
natural gas segment. We focus on the natural gas segment because of
the significant infrastructure that needs to be put in place (consistent with
utility operations in general) prior to the generation of revenues and
associated cash flows resulting from the investments. NPL’s capital
requirements and required investments (primarily trenching-related machinery)
are not as long-term in nature and can be adjusted more easily dependent upon
current workloads. Because of the overwhelming significance of the
natural gas operations segment to the consolidated Company’s capital
requirements and resources, we believe a separate discussion of the capital
requirements and resources of the business as a whole would be redundant and
provide little
H.
Christopher Owings
United
States Securities and Exchange Commission
September
15, 2008
Page 6 of
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additional
useful information to investors. There are currently no known trends,
demands, commitments, events, or uncertainties that are likely to affect
liquidity, other than as noted (e.g., natural gas prices and debt obligations);
however, we will continue to assess the potential impacts of known future issues
on our liquidity and revise, if necessary, our disclosures
accordingly. We will also consider the need for a three-year cash
flow discussion in future annual filings based on material changes, if any,
during those periods presented.
Contractual Obligations,
page 45
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8.
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Please
revise to include estimated interest payments on outstanding long-term
debt obligations. Because the table is aimed at increasing
transparency of cash flow, we believe interest payments should be included
in the table. If you choose not to include these payments,
please provide information regarding future interest payments in a
footnote to the table. See Section IV.A and footnote 46 to the
Commission’s Guidance Regarding Management’s Discussion and Analysis of
Financial Condition and Results of Operations, SEC Release No. 33-8350,
issued December 19, 2003 and available on our website at http://www.sec.gov/rules/interp/33-8350.htm.
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Response:
We will
provide estimated interest payment information as a separate line item of the
contractual obligations table in our 2008 Annual Report filing.
Financial Statements, page
50
Consolidated Statements of
Income, page 51
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9.
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Please
tell us the significant items and their amounts included in other income
for each year presented. Please disclose material items and
their amounts included in other income on the face of the statement or in
the notes to the consolidated financial statements. Refer to
Rule 5-03(b)(7) of Regulation S-X.
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Response:
Please
refer to Appendix B for a table that details amounts included in other income
for 2005, 2006, and 2007. We note that other income in total is less
than one percent of total revenues. We do not believe that any of the
items within other income are material (i.e., would require separate
disclosure).
H.
Christopher Owings
United
States Securities and Exchange Commission
September
15, 2008
Page 7 of
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We will
continue to monitor items comprising other income and will disclose material
items, as applicable, and their amounts in the notes to the consolidated
financial statements (or on the face thereof) in future 10-Q and 10-K
filings.
Consolidated Statements of
Cash Flows, page 52
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10.
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Please
tell us the items and their amounts included in other cash flows from
operating and investing activities for each year
presented. Also tell us why a further breakdown of other
operating cash flows would not be meaningful to investors. In
addition, tell us your basis for presenting an “other” line item in
investing cash flows given the guidance in paragraph 31 of SFAS
95.
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Response:
Please
refer to Appendix C for tables that detail items and their amounts included in
other cash flows from operating and investing activities for each year
presented.
Based on
the relative insignificance of “Other” operating cash flows in comparison to
total operating cash flows (2% in 2007, 3% in 2006, and 6% in 2005), a breakout
of these amounts would not appear to significantly add value to investor
decision making. However, if items now included in “Other” become
individually significant, we will separately identify them in future
filings. We note the guidance in paragraph 31 of SFAS No. 95 and
believe that significant investing outflows are represented in the construction
expenditures and property additions line while investing inflows (including net
proceeds from sales of property) are represented by the “Other” investing
line. As noted in Appendix C, minor investing outflows are included
in the “Other” investing line, but were not deemed significant. In
the 2008 Annual Report and future 10-Q and 10-K filings, we will separately
identify “Changes in customer advances” and break out the remaining “Other”
investing activity into captions such as “Miscellaneous inflows” and
“Miscellaneous outflows”.
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11.
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Please
tell us the rationale for reporting cash receipts and payments pertaining
to the long term and short term portions of your credit facility on a net
basis. Refer to paragraphs 11-13 of SFAS 95. Also
tell us your rationale for designating portions of your credit facility as
short-term and long-term debt.
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Response:
Our
credit facility borrowings are for specific short-term durations (three months
or less) and must then be repaid or “reborrowed” under new terms
(e.g.,
H.
Christopher Owings
United
States Securities and Exchange Commission
September
15, 2008
Page 8 of
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interest
rate, duration, etc.). We believe this meets the criteria for net
reporting as described in paragraphs 11-13 of SFAS No. 95.
Prior to
entering into the current credit facility agreement, we had a multi-year credit
facility (long-term) and a 364-day facility (short-term) with a group of
banks. Those arrangements reflected management’s anticipated
long-term (financing) and short-term (liquidity) needs. We
subsequently negotiated a 5-year agreement that encompassed both long-term and
short-term needs. The designation of $150 million of the credit
facility as short-term was to assist in the transparency of management’s
intention to use this as a source of liquidity (for working capital needs) and
not permanent financing (see Notes 6 and 7 of the 2007 Annual
Report).
Consolidated Statements of
Stockholders’ Equity and Comprehensive Income, page 53
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12.
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Please
tell us the items and their amounts included in the common stock issuances
line item for each year presented. Also tell us how you
classify stock-based compensation and related tax benefits in the
statement, and why these amounts are not significant reconciling items
that should be separately disclosed. Finally, tell how you
classify stock-based compensation expense in the consolidated statements
of cash flows.
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Response:
Please
see Appendix D for a table detailing the items and their amounts included in the
common stock issuances line item for 2005, 2006, and
2007. Stock-based compensation expense (a component of the
“Operations and maintenance” expense income statement caption) is reflected in
the “Net income” line of the Consolidated Statements of Stockholders’ Equity and
Comprehensive Income. The incremental corporate tax benefits
associated with disqualifying dispositions of “in-the-money” options exercised
are primarily included as additional paid-in capital because the options
exercised during the three-years ended December 31, 2007 related to options
vested prior to the adoption of the fair value provisions of SFAS No. 123(R)
(i.e., no compensation expense had been recognized for at-the-money option
grants). Stock-based compensation is currently reflected in the net
income component of operating cash flows and the associated common stock
issuances are reflected in financing cash flows.
H.
Christopher Owings
United
States Securities and Exchange Commission
September
15, 2008
Page 9 of
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Notes to Consolidated
Financial Statements, page 54
Note 4 – Regulatory Assets
and Liabilities, page 59
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13.
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If
recovery of a regulated asset is provided without a return on investment
during the recovery period, please disclose the remaining amounts of such
assets and the remaining recovery period applicable to
them. Refer to paragraph 20 of SFAS
71.
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Response:
We note
the requirements of paragraph 20 of SFAS No. 71 and will disclose the above
information in future 10-K filings, as applicable.
Note 10 – Stock-Based
Compensation, page 67
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14.
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Please
disclose total compensation cost for stock-based compensation arrangements
recognized in the statements of income as well as the total recognized tax
benefit related thereto. Refer to paragraphs A240g and A240h of
SFAS 123(R). In addition, please disclose the following
information with respect to your performance share stock plan and
restricted stock/unit plan as required by paragraphs A240b and A240c of
SFAS 123(R):
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the
weighted average grant-date fair value for shares nonvested at the
beginning of the year, those nonvested at the end of the year and those
vested or forfeited during the
year;
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·
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the
weighted average grant date fair value of performance shares and
restricted stock/units granted and total fair value of performance shares
and restricted stock/units vested for each year for which an income
statement is provided; and
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total
compensation cost related to nonvested awards not yet recognized and the
weighted-average period over which it is expected to be
recognized.
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Response:
We will
disclose total compensation cost for stock-based compensation as well as the
detailed information noted above related to the performance share stock and
restricted stock/unit plans in future 10-K filings, as applicable.
H.
Christopher Owings
United
States Securities and Exchange Commission
September
15, 2008
Page 10 of
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Note 11 – Income Taxes, page
70
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15.
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Please
provide us with a reconciliation of deferred income tax expense to the
amounts reported in the consolidated statements of cash flows for each
year presented.
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Response:
Please
see Appendix E for the reconciliations of deferred income tax expense to the
amounts reported in the cash flow statements.
Note 12 – Segment
Information, page 72
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16.
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Please
disclose interest revenue for each reportable segment as required by
paragraph 27c of SFAS 131.
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Response:
As
depicted in Appendix B, we believe interest income for each segment has been
insignificant (less than one-half of one percent of total revenues) and as such
was not previously reported as allowed by paragraph 95 of SFAS
131. We will disclose interest revenue by segment in future 10-Q and
10-K filings, if interest revenue becomes a more significant element of total
revenues.
Definitive Proxy Statement
on Schedule 14A
Compensation Discussion and
Analysis, page 16
General
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17.
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Please
provide clear disclosure that addresses how decisions regarding particular
elements of your compensation program fit into your overall compensation
objectives and affect decisions regarding other elements. You
provide disclosure addressing each individual compensation element but, as
a general matter, your disclosure lacks qualitative or quantitative
discussion of how decisions regarding one type of award motivate the
Compensation Committee to award other elements of
compensation. Please revise the Compensation Discussion and
Analysis to explain and place in context the relationship among each
element of compensation and why determinations with respect to one element
may or may not have influenced the Committee’s decisions with respect to
other allocated or contemplated awards. See Items
402(b)(1)(iv)-(vi) of Regulation
S-K.
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H.
Christopher Owings
United
States Securities and Exchange Commission
September
15, 2008
Page 11 of
16
Response:
We
acknowledge the Staff’s comment and confirm that in future proxy statement
filings, we will revise our Compensation Discussion and Analysis to clarify the
relationship among the various elements of compensation, as applicable, and how
determinations regarding such compensation elements may or may not have
influenced the Compensation Committee’s decisions with respect to other
allocated or contemplated awards.
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18.
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Your
disclosure references a national focus group, a regional focus group, and
various peer groups, some of which list the names of the companies in the
group. Please specify (1) how overall compensation as well as
each element of compensation relate to the data you analyzed from each
focus group, (2) how overall compensation as well as each element of
compensation relates to the data you analyzed from the various peer
groups, and (3) why the company uses different groups of companies to
benchmark overall compensation as well as different elements of
compensation. Please include a specific discussion of where you
target each element of compensation against the focus group or peer group
companies, as the case may be, and where actual payments fall within
targeted parameters, in each case naming the focus or peer group
companies. Please also include a discussion of how the
Committee uses focus group information as compared to peer group
information. Refer to Item 402(b)(2)(xiv) of Regulation
S-K. If some elements of compensation are not targeted against
any of the focus or peer groups, please disclose how these amounts are
determined. Refer to Item 402(b)(1)(v) of Regulation
S-K.
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H.
Christopher Owings
United
States Securities and Exchange Commission
September
15, 2008
Page 12 of
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Response:
We
acknowledge the Staff’s comment and confirm that in future proxy statement
filings, we will, where applicable:
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·
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revise
our Compensation Discussion and Analysis to specify how overall
compensation, as well as each element, relates to the data analyzed from
each focus group and the peer group, and why we use different groups to
benchmark overall compensation as well as different elements of
compensation;
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include
a specific discussion of where actual payments fall within targeted
parameters of the peer or focus group;
and
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·
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include
a discussion of how the Compensation Committee uses focus group
information as compared to peer group
information.
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Performance-Based
Compensation, page 18
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19.
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We
note that you disclose how to calculate the threshold and maximum amounts
for your 2008 return on equity, customer-to-employee ratio and operating
costs performance measures, which is helpful to an investor’s
understanding of these measures, but that you do not disclose the actual
threshold and maximum amounts for these performance
measures. To enhance an investor’s understanding of these
performance measures, please disclose the threshold and maximum
numbers. Please also consider whether a tabular presentation of
these measures would be helpful to investors. Further, confirm
that you will include the grant of non-equity incentive plan compensation
in the grants of plan-based awards table for 2008 compensation and advise
us why you did not include that information in the 2007 compensation
disclosure. Refer to Item 402(d) of Regulation
S-K.
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H.
Christopher Owings
United
States Securities and Exchange Commission
September
15, 2008
Page 13 of
16
Response:
We
acknowledge the Staff’s comment and confirm that in future proxy statement
filings, we will, where applicable, disclose the actual threshold and maximum
amounts that relate to the various performance measures discussed in the
Compensation Discussion and Analysis section of the proxy
statement. In preparing our future proxy statements, we will consider
whether tabular disclosure of such information is helpful to investors, but we
note that as the formulas for each threshold and maximum amount differs among
the various performance measures, a tabular format may not be the most helpful
way to disclose such information to investors.
As it
relates to the disclosure of non-equity incentive plan compensation in the
grants of plan-based awards table, we supplementally advise the Staff that for
future proxy statements, we will disclose the non-equity portion of the award
opportunity granted under our Management Incentive Plan for the year in which
such award was established under columns (c), (d) and (e) of the Grants of
Plan-Based Awards Table (to the extent that all such columns are relevant), as
opposed to when the award was paid. Likewise, we will disclose the
equity portion of the award opportunity granted under our Management Incentive
Plan for the year in which such award was established under columns (f), (g) and
(h) of the Grants of Plan-Based Awards Table (to the extent that all such
columns are relevant), as opposed to when the restricted performance shares are
issued. Typically, the award is granted and earned in the same year,
even though the award is not paid (or restricted performance shares issued)
until the beginning of the succeeding fiscal year. Because the
non-equity and equity portions of the award are granted and earned in the same
year, we intend to change the heading for the columns covering both the
non-equity and the equity portions of the award to “Estimated Possible Payouts
Under Non-Equity Incentive Plan Awards” and “Estimated Possible Payouts Under
Equity Incentive Plan Awards”, as applicable. Further, as the proxy
statement will be filed after the number of restricted performance shares have
been determined for an equity award made for the year covered by the proxy
statement, we intend to disclose the actual number of shares subject to such
award in the table.
The
non-equity incentive plan compensation was not included in the Grants of
Plan-Based Awards Table for 2007 because the table was prepared without
distinguishing between the establishment of the awards (i.e., the grant date)
and the date the award was paid. By treating the date paid
as the grant date, it appeared that the appropriate treatment for this
compensation, as explained in Item 402(c)(2)(vii) of Regulation S-K, was to
include it in column (g) of the Summary Compensation Table. Our
treatment of the non-equity incentive plan compensation for fiscal 2007 was
explained in the narrative following the
H.
Christopher Owings
United
States Securities and Exchange Commission
September
15, 2008
Page 14 of
16
Summary
Compensation and Grants of Plan-Based Awards Tables on page 26 of the Proxy
Statement. However, as discussed in the preceding paragraph, we
confirm that we will disclose the non-equity incentive plan compensation in the
Grants of Plan-Based Awards Table in future proxy statements.
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20.
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You
state that “payment of the [performance] awards will be subject to
reduction depending upon satisfaction of … individual performance
goals.” Please disclose the individual performance goals for
your named executive officers. Please disclose if the committee
(in the case of Mr. Shaw) or Mr. Shaw (in the case of the remaining named
executive officers) can reduce an award for one performance measure but
not another. If not, please disclose this fact. If
so, please disclose how these determinations are made by the Committee or
Mr. Shaw, as the case may be.
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Response:
We
acknowledge the Staff’s comment and confirm that in future proxy statement
filings, we will include a discussion of the individual performance goals for
our Named Executive Officers and whether performance measures can be reduced,
and if so, the determinations that are made in making such reductions.
Outstanding Equity Awards at
Fiscal Year-End 2007, page 27
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21.
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We
note that the option awards columns do not include a heading “Option
Awards” and that the heading “Stock Awards” instead appears over some of
the option award columns and not the stock awards
columns. Please revise this table to reflect the appropriate
headings.
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Response:
We
acknowledge the Staff’s comment and confirm that in future proxy statement
filings, we will revise the Outstanding Equity Awards at Fiscal Year-End table
to reflect the appropriate headings.
Potential payments upon
termination or change-in-control, page 31
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22.
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Please
describe and explain how the appropriate payment and benefit levels were
determined under the various circumstances that trigger payments or
provision of benefits for termination events both prior to a change of
control and within two years after a change of control. Refer
to Item 402(j)(3) of Regulation S-K and Instruction 1 to Item 402(j) of
Regulation S-K.
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H.
Christopher Owings
United
States Securities and Exchange Commission
September
15, 2008
Page 15 of
16
Response:
We
acknowledge the Staff’s comment and confirm that in future proxy statement
filings, we will revise our disclosure regarding potential payments upon
termination or change-in-control to clarify, as applicable, how the payment and
benefit levels were determined for termination events both prior to, and within
two years after, a change in control.
Director compensation, page
32
|
|
23.
|
Please
disclose by footnote to the appropriate column, the grant date fair value
of each equity award computed in accordance with FAS
123R. Refer to the instruction to Item 402(k)(2)(iii) of
Regulation S-K.
|
Response:
We
acknowledge the Staff’s comment and confirm that in future proxy statement
filings, we will include a footnote to the appropriate column that discloses the
grant date fair value of each equity award computed in accordance with FAS
123R.
Form 10-Q for Quarterly
Period Ended June 30, 2008
|
|
24.
|
Please
address the comments above to the extent
applicable.
|
Response:
We
acknowledge the Staff’s comments, as discussed with Staff, and confirm that we
will address the foregoing comments and responses, to the extent applicable, in
future 10-Q filings with the SEC.
H.
Christopher Owings
United
States Securities and Exchange Commission
September
15, 2008
Page 16 of
16
In
connection with our responses to your comments, the Company acknowledges
that:
|
·
|
the
Company is responsible for the adequacy and accuracy of the disclosure in
the filings;
|
|
·
|
staff
comments or changes to disclosure in response to staff comments do not
foreclose the Commission from taking any action with respect to the
filings; and
|
|
·
|
the
Company may not assert staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities
laws of the United States.
|
Sincerely,
/s/ Roy
R. Centrella
sw
APPENDIX A
|
Southwest
Gas Corporation
|
||||||||||||||||||||
|
Reconciliation
of Stand-Alone to Consolidated Income Statements
|
||||||||||||||||||||
|
2005
|
||||||||||||||||||||
|
NPL
|
NPL
|
NPL
|
NATURAL
GAS
|
CONSOLIDATED
|
||||||||||||||||
|
STAND-ALONE
|
RECLASS
|
CONSOLIDATED
|
CONSOLIDATED
|
BASIS
|
||||||||||||||||
|
BASIS
|
BASIS
|
|||||||||||||||||||
|
(In
thousands)
|
||||||||||||||||||||
|
GAS
OPERATING REVENUES
|
$ | 1,455,257 | $ | 1,455,257 | ||||||||||||||||
|
CONSTRUCTION
REVENUES
|
$ | 259,026 | $ | 259,026 | 259,026 | |||||||||||||||
|
NET
COST OF GAS SOLD
|
828,131 | 828,131 | ||||||||||||||||||
|
OPERATIONS
AND MAINTENANCE
|
314,437 | 314,437 | ||||||||||||||||||
|
DEPRECIATION
AND AMORTIZATION
|
$ | 18,272 | 18,272 | 137,981 | 156,253 | |||||||||||||||
|
TAXES
OTHER THAN INCOME TAXES
|
39,040 | 39,040 | ||||||||||||||||||
|
COST
OF CONSTRUCTION
|
237,356 | (17,222 | ) | a) | ||||||||||||||||
|
GENERAL AND
ADMINISTRATIVE EXPENSES
|
6,672 | (1,032 | ) | a) | ||||||||||||||||
|
CONSTRUCTION
EXPENSES
|
225,774 | c) | 225,774 | |||||||||||||||||
|
NET
INTEREST DEDUCTIONS
|
1,009 | 1,009 | 81,595 | 82,604 | ||||||||||||||||
|
NET
INTEREST DEDUCTIONS ON SUBORDINATED DEBENTURES
|
7,723 | 7,723 | ||||||||||||||||||
|
OTHER
INCOME (DEDUCTIONS)
|
3,009 | 18 | b) | 3,027 | 5,087 | 8,114 | ||||||||||||||
|
INCOME
TAX EXPENSE
|
6,845 | 6,845 | 17,767 | 24,612 | ||||||||||||||||
|
a) Reclass
depreciation amounts to depreciation and amortization.
|
||||||||||||||||||||
|
b) Amortization
reclassed to depreciation and amortization.
|
||||||||||||||||||||
|
c) Combination
of cost of construction and G&A expenses.
|
||||||||||||||||||||
Page
1
APPENDIX A
|
Southwest
Gas Corporation
|
||||||||||||||||||||
|
Reconciliation
of Stand-Alone to Consolidated Income Statements
|
||||||||||||||||||||
|
2006
|
||||||||||||||||||||
|
NPL
|
NPL
|
NPL
|
NATURAL
GAS
|
CONSOLIDATED
|
||||||||||||||||
|
STAND-ALONE
|
RECLASS
|
CONSOLIDATED
|
CONSOLIDATED
|
BASIS
|
||||||||||||||||
|
BASIS
|
BASIS
|
|||||||||||||||||||
|
(In
thousands)
|
||||||||||||||||||||
|
GAS
OPERATING REVENUES
|
$ | 1,727,394 | $ | 1,727,394 | ||||||||||||||||
|
CONSTRUCTION
REVENUES
|
$ | 297,364 | $ | 297,364 | 297,364 | |||||||||||||||
|
NET
COST OF GAS SOLD
|
1,033,988 | 1,033,988 | ||||||||||||||||||
|
OPERATIONS
AND MAINTENANCE
|
320,803 | 320,803 | ||||||||||||||||||
|
DEPRECIATION
AND AMORTIZATION
|
$ | 22,310 | 22,310 | 146,654 | 168,964 | |||||||||||||||
|
TAXES
OTHER THAN INCOME TAXES
|
34,994 | 34,994 | ||||||||||||||||||
|
COST
OF CONSTRUCTION
|
271,743 | (21,204 | ) | a) | ||||||||||||||||
|
GENERAL AND
ADMINISTRATIVE EXPENSES
|
7,377 | (1,089 | ) | a) | ||||||||||||||||
|
CONSTRUCTION
EXPENSES
|
256,827 | c) | 256,827 | |||||||||||||||||
|
NET
INTEREST DEDUCTIONS
|
1,686 | 1,686 | 85,567 | 87,253 | ||||||||||||||||
|
NET
INTEREST DEDUCTIONS ON SUBORDINATED DEBENTURES
|
7,724 | 7,724 | ||||||||||||||||||
|
OTHER
INCOME (DEDUCTIONS)
|
4,086 | 17 | b) | 4,103 | 10,049 | 14,152 | ||||||||||||||
|
INCOME
TAX EXPENSE
|
8,257 | 8,257 | 36,240 | 44,497 | ||||||||||||||||
|
a) Reclass
depreciation amounts to depreciation and amortization.
|
||||||||||||||||||||
|
b) Amortization
reclassed to depreciation and amortization.
|
||||||||||||||||||||
|
c) Combination
of cost of construction and G&A expenses.
|
||||||||||||||||||||
Page
2
APPENDIX A
|
Southwest
Gas Corporation
|
||||||||||||||||||||
|
Reconciliation
of Stand-Alone to Consolidated Income Statements
|
||||||||||||||||||||
|
2007
|
||||||||||||||||||||
|
NPL
|
NPL
|
NPL
|
NATURAL
GAS
|
CONSOLIDATED
|
||||||||||||||||
|
STAND-ALONE
|
RECLASS
|
CONSOLIDATED
|
CONSOLIDATED
|
BASIS
|
||||||||||||||||
|
BASIS
|
BASIS
|
|||||||||||||||||||
|
(In
thousands)
|
||||||||||||||||||||
|
GAS
OPERATING REVENUES
|
$ | 1,814,766 | $ | 1,814,766 | ||||||||||||||||
|
CONSTRUCTION
REVENUES
|
$ | 337,322 | $ | 337,322 | 337,322 | |||||||||||||||
|
NET
COST OF GAS SOLD
|
1,086,194 | 1,086,194 | ||||||||||||||||||
|
OPERATIONS
AND MAINTENANCE
|
331,208 | 331,208 | ||||||||||||||||||
|
DEPRECIATION
AND AMORTIZATION
|
$ | 25,424 | 25,424 | 157,090 | 182,514 | |||||||||||||||
|
TAXES
OTHER THAN INCOME TAXES
|
37,553 | 37,553 | ||||||||||||||||||
|
COST
OF CONSTRUCTION
|
310,848 | (24,142 | ) | a) | ||||||||||||||||
|
GENERAL AND
ADMINISTRATIVE EXPENSES
|
8,590 | (1,264 | ) | a) | ||||||||||||||||
|
CONSTRUCTION
EXPENSES
|
294,032 | c) | 294,032 | |||||||||||||||||
|
NET
INTEREST DEDUCTIONS
|
2,036 | 2,036 | 86,436 | 88,472 | ||||||||||||||||
|
NET
INTEREST DEDUCTIONS ON SUBORDINATED DEBENTURES
|
7,727 | 7,727 | ||||||||||||||||||
|
OTHER
INCOME (DEDUCTIONS)
|
1,768 | 18 | b) | 1,786 | 4,850 | 6,636 | ||||||||||||||
|
INCOME
TAX EXPENSE
|
6,864 | 6,864 | 40,914 | 47,778 | ||||||||||||||||
|
a) Reclass
depreciation amounts to depreciation and amortization.
|
||||||||||||||||||||
|
b) Amortization
reclassed to depreciation and amortization.
|
||||||||||||||||||||
|
c) Combination
of cost of construction and G&A expenses.
|
||||||||||||||||||||
Page
3
APPENDIX B
|
SOUTHWEST
GAS CORPORATION
|
||||||||||||
|
DETAILS
OF CONSOLIDATED OTHER INCOME (DEDUCTIONS)
|
||||||||||||
|
YEAR-TO-DATE
ANALYSIS
|
||||||||||||
|
(in
thousands)
|
||||||||||||
|
YEAR
TO DATE DECEMBER
|
||||||||||||
|
Other
Income (Deductions)
|
2007
|
2006
|
2005
|
|||||||||
|
PGA
interest income
|
$ | 3,490 | $ | 5,937 | $ | 4,313 | ||||||
|
Investment
interest income
|
876 | 726 | 378 | |||||||||
|
Property
tax interest income
|
- | 1,048 | - | |||||||||
|
Allowance
for equity funds used during construction
|
725 | 1,383 | 977 | |||||||||
|
Contributions/donations
|
(631 | ) | (539 | ) | (510 | ) | ||||||
|
Long-term
investment returns
|
1,165 | 2,740 | 2,740 | |||||||||
|
Miscellaneous
deductions
|
(2,359 | ) | (2,404 | ) | (3,344 | ) | ||||||
|
Miscellaneous
income
|
1,584 | 1,158 | 533 | |||||||||
|
Total
gas operations
|
4,850 | 10,049 | 5,087 | |||||||||
|
NPL
gain on equipment sales
|
1,713 | 3,968 | 2,928 | |||||||||
|
NPL
interest income
|
82 | 132 | 105 | |||||||||
|
NPL
miscellaneous income
|
26 | 30 | 29 | |||||||||
|
NPL
miscellaneous expense
|
(35 | ) | (27 | ) | (35 | ) | ||||||
|
Other
income (deductions)
|
$ | 6,636 | $ | 14,152 | $ | 8,114 | ||||||
APPENDIX
C
|
SOUTHWEST
GAS CORPORATION
|
||||||||||||
|
CASH
FLOW STATEMENT - OTHER OPERATING DETAIL
|
||||||||||||
|
(in
thousands)
|
||||||||||||
|
YEAR
TO DATE DECEMBER
|
||||||||||||
|
Operating
Cash Flows - Other
|
2007
|
2006
|
2005
|
|||||||||
|
Change
in deferred credits
|
$ | 1,111 | $ | (1,753 | ) | $ | 22,439 | |||||
|
Change
in deferred charges
|
(4,971 | ) | (1,780 | ) | (5,792 | ) | ||||||
|
Property-related
changes (AFUDC)
|
(871 | ) | (1,156 | ) | (295 | ) | ||||||
|
Gains
on sales
|
(2,530 | ) | (3,968 | ) | (2,928 | ) | ||||||
|
Other
operating cash flow
|
$ | (7,261 | ) | $ | (8,657 | ) | $ | 13,424 | ||||
Page
1
APPENDIX C
|
SOUTHWEST
GAS CORPORATION
|
||||||||||||
|
CASH
FLOW STATEMENT - OTHER INVESTING DETAIL
|
||||||||||||
|
(in
thousands)
|
||||||||||||
|
YEAR
TO DATE DECEMBER
|
||||||||||||
|
Investing
Cash Flows - Other
|
2007
|
2006
|
2005
|
|||||||||
|
Property-related
(salvage)
|
$ | 578 | $ | 2,727 | $ | 2,113 | ||||||
|
Changes
in advances to subs.
|
401 | 105 | 711 | |||||||||
|
Changes
in customer advances
|
24,407 | 27,988 | 14,194 | |||||||||
|
So.
Lake Tahoe acquisition
|
- | - | (15,209 | ) | ||||||||
|
Other
property/investments
|
(18,724 | ) | - | - | ||||||||
|
Long-term
investments
|
(2,000 | ) | (5,560 | ) | (5,132 | ) | ||||||
|
Net
proceeds from property sales
|
4,526 | 8,066 | 5,291 | |||||||||
|
Other
|
(248 | ) | (127 | ) | 17 | |||||||
|
Other
investing cash flow
|
$ | 8,940 | $ | 33,199 | $ | 1,985 | ||||||
Page
2
APPENDIX D
|
SOUTHWEST
GAS CORPORATION
|
||||||||||||||||||||||||
|
COMMON
STOCK ISSUANCES
|
||||||||||||||||||||||||
|
(in
thousands)
|
||||||||||||||||||||||||
|
YEAR
TO DATE DECEMBER
|
||||||||||||||||||||||||
|
Common
Stock Issuances
|
2007
|
2006
|
2005
|
|||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
|||||||||||||||||||
|
Equity
Shelf Program (ESP)
|
- | $ | - | 947 | $ | 28,290 | 575 | $ | 13,458 | |||||||||||||||
|
Stock
Option/Management Incentive Plans (SIP and MIP)
|
238 | 6,818 | 843 | 22,430 | 476 | 12,220 | ||||||||||||||||||
|
Employee
Investment Plan (EIP)
|
440 | 14,746 | 257 | 7,786 | 1,013 | 25,852 | ||||||||||||||||||
|
Dividend
Reinvestment and Stock Purchase Plan (DRSPP)
|
358 | 11,971 | 395 | 12,401 | 470 | 12,179 | ||||||||||||||||||
|
Net
increase in undistributed stock-based compensation
|
- | 1,605 | - | 2,118 | - | 739 | ||||||||||||||||||
|
Stock
issuance expenses
|
- | (43 | ) | - | (573 | ) | - | (312 | ) | |||||||||||||||
|
Total
common stock issuances
|
1,036 | $ | 35,097 | 2,442 | $ | 72,452 | 2,534 | $ | 64,136 | |||||||||||||||
APPENDIX E
|
Southwest
Gas Corporation
|
||||||||||||
|
Deferred
Income Tax Reconciliation - Income Statement to Cash Flow
Statement
|
||||||||||||
|
(in
thousands)
|
||||||||||||
|
2007
|
2006
|
2005
|
||||||||||
|
Total
deferred income tax expense
|
$ | 3,121 | $ | 9,751 | $ | 21,841 | ||||||
|
Alternative
minimum tax
|
14,302 | (7,917 | ) | (4,875 | ) | |||||||
|
FAS
109 adjustment for ITC and previously flowed-through items
|
(414 | ) | (604 | ) | (627 | ) | ||||||
|
Prior
year net operating loss adjustment
|
- | 2,646 | (2,720 | ) | ||||||||
|
Deferred
taxes reflected in other operating cash flows
|
- | - | (18,990 | ) | ||||||||
|
Other
Adjustments
|
(941 | ) | 33 | (143 | ) | |||||||
|
Deferred
income taxes as reported on cash flow statements
|
$ | 16,068 | $ | 3,909 | $ | (5,514 | ) | |||||