Page 52 - SWGas Annual Report 2015

Subsequent Events. Management of the Company monitors events occurring after the balance sheet date and
prior to the issuance of the financial statements to determine the impacts, if any, of events on the financial
statements to be issued or disclosures to be made, and has reflected them where appropriate.

Note 2 – Utility Plant and Leases
Net utility plant as of December 31, 2015 and 2014 was as follows (thousands of dollars):

December 31, 2015 2014

Gas plant: $ 22,944 $ 22,531
Storage 312,996 312,300
Transmission
Distribution 4,935,730 4,655,640
General 365,865 356,072
Software and software-related intangibles 203,323 196,035
Other 14,059 14,021

Less: accumulated depreciation 5,854,917 5,556,599
Acquisition adjustments, net (2,084,007) (1,973,098)
Construction work in progress
370 550
119,805 74,332

Net utility plant $ 3,891,085 $ 3,658,383

Utility plant depreciation is computed on the straight-line remaining life method at composite rates considered
sufficient to amortize costs over estimated service lives, including components which compensate for removal
costs (net of salvage value), and retirements, based on the processes of regulatory proceedings and related
regulatory commission approvals and/or mandates. In 2015, annual depreciation and amortization expense
averaged 3.6% of the original cost of depreciable and amortizable property. Average rates in 2014 and 2013 also
approximated 3.6% on average.

Depreciation and amortization expense on gas plant, including intangibles, was as follows (thousands of dollars):

2015 2014 2013

Depreciation and amortization expense $201,233 $194,360 $185,283

Included in the figures above is amortization of intangibles of $12.7 million in 2015, $11.7 million in 2014, and
$10.3 million in 2013.

Operating Leases and Rentals. The Company leases certain office and construction equipment. The majority of
these leases are short-term and accounted for as operating leases. For the gas segment, these leases are also
treated as operating leases for regulatory purposes. Centuri has various short-term operating leases of equipment
and temporary office sites. The table below presents Southwest’s rental payments and Centuri’s lease payments
that are included in operating expenses (in thousands):

2015 2014 2013

Southwest Gas $ 4,186 $ 5,330 $ 8,308
Centuri 45,849 30,012 27,118

Consolidated rental payments/lease expense $50,035 $35,342 $35,426

Southwest Gas Corporation