Page 82 - SWGas Annual Report 2015

traded equities, their financial solvency, and other factors. Once the guideline companies are determined, enterprise value is
calculated using a weighted approach of projected earnings before interest expense and taxes (“EBIT”) and earnings before
interest expense, taxes, and depreciation and amortization expense (“EBITDA”). After an estimated fair value is determined, it is
multiplied by 3.4%. A discount is then applied due to limitations of the nonpublic noncontrolling interest being valued. Prior to
the exchange rights being exercised in the third quarter of 2015, a Monte Carlo simulation methodology was used to assign a
value to the redeemable noncontrolling interest. Each quarter, market changes in the guideline companies are considered and
the weighted approach to projected EBIT and EBITDA, in relation to the guideline companies, is re-evaluated to determine if
value changes are necessary at each quarterly reporting date. The negative adjustment to the redemption value in the table
above reflects the sum of adjustments made during the year.

Centuri also holds a 65% interest in a venture to market natural gas engine-driven heating, ventilating, and air conditioning
(“HVAC”) technology and products. Centuri consolidates the entity (IntelliChoice Energy, LLC) as a majority-owned subsidiary.
The interest is immaterial to the consolidated financial statements, but is identified as the Noncontrolling interest within Total
equity on the Consolidated Balance Sheets.

Note 17 – Acquisition of Construction Services Businesses
In October 2014, the Company, through its subsidiaries, completed the acquisition of three privately held, affiliated construction
businesses. The acquisition extended the construction services operations into Canada and provides additional opportunities
for market expansion. Funding for the acquisition was primarily provided by a new $300 million secured revolving credit and
term loan facility described in Note 7 – Long-Term Debt. The acquired companies comprise: (i) Link-Line Contractors Ltd., an
Ontario corporation (“Link-Line”), (ii) W.S. Nicholls Construction, Inc., an Ontario corporation, as well as two additional companies
also operating under the name W.S. Nicholls (collectively “W.S. Nicholls”); and (iii) via asset purchase, the business of Brigadier
Pipelines Inc., a Delaware corporation, operating primarily in Pennsylvania (“Brigadier”).

Assets acquired and liabilities assumed in the transaction were recorded, generally, at their acquisition date fair values.
Transaction costs associated with the acquisition were expensed in 2014. The Company’s allocation of the purchase price in
2014 was based on an evaluation of the appropriate fair values and represented management’s best estimate based on
available data (including market data, data regarding customers of the acquired businesses, terms of acquisition-related
agreements, analysis of historical and projected results, and other types of data). The analysis included the impacts of
differences between Accounting Standards for Private Enterprises in Canada and U. S. GAAP applicable to public companies, as
well as consideration of types of intangibles that were acquired, including non-competition agreements, customer relationships,
trade names, and work backlog. The final purchase accounting has been completed. The October 1, 2014 fair values of assets
acquired and liabilities assumed, revised during the first quarter of 2015, are as follows (in millions of dollars):

Measurement Revised

Acquisition Period Acquisition

Date Adjustments Date

Cash, cash equivalents, and restricted cash $3 $— $ 3
Contracts receivable and other receivables 62 — 62
Property, plant and equipment 17 — 17
Other assets 17 (2) 15
Intangible assets 52 — 52
Goodwill 1 131
130
Total assets acquired
Current liabilities 281 (1) 280
Deferred income tax – long-term
Other long-term liabilities 39 1 40

Net assets acquired 17 — 17

4— 4

$221 $(2) $219

Southwest Gas Corporation