Note 6 – Long-Term Debt

Carrying amounts of the Company’s long-term debt and their related estimated fair values as of September 30, 2016 and December 31, 2015 are disclosed in the following table. The fair values of the revolving credit facility (including commercial paper) and the variable-rate Industrial Development Revenue Bonds (“IDRBs”) approximate their carrying values, as they are repaid quickly (in the case of credit facility borrowings) and have interest rates that reset frequently. They are categorized as Level 1 (quoted prices for identical financial instruments) within the three-level fair value hierarchy that ranks the inputs used to measure fair value by their reliability, due to the Company’s ability to access similar debt arrangements at measurement dates with comparable terms, including variable rates. The fair values of debentures, senior notes, and fixed-rate IDRBs were determined utilizing a market-based valuation approach, where fair market values are determined based on evaluated pricing data, such as broker quotes and yields for similar securities adjusted for observable differences. Significant inputs used in the valuation generally include benchmark yield curves, credit ratings and issuer spreads. The external credit rating, coupon rate, and maturity of each security are considered in the valuation, as applicable. The market values of debentures and fixed-rate IDRBs are categorized as Level 2 (observable market inputs based on market prices of similar securities). The Centuri secured revolving credit and term loan facility and Centuri other debt obligations (not actively traded) are categorized as Level 3, based on significant unobservable inputs to their fair values. Since Centuri’s debt is not publicly traded, fair values for the secured revolving credit and term loan facility and other debt obligations were based on a conventional discounted cash flow methodology and utilized current market pricing yield curves, across Centuri’s debt maturity spectrum, of other industrial bonds with an assumed credit rating comparable to the Company’s.


	September 30, 2016					December 31, 2015
	Carrying			Market		Carrying			Market
	Amount			Value		Amount			Value
(Thousands of dollars)
Debentures:
Notes, 4.45%, due 2020	$	125,000		$	133,819	$	125,000		$	130,273
Notes, 6.1%, due 2041		125,000			162,340		125,000			141,581
Notes, 3.875%, due 2022		250,000			260,813		250,000			253,600
Notes, 4.875%, due 2043		250,000			295,000		250,000			251,483
Notes, 3.8%, due 2046		300,000			303,789		—			—
8% Series, due 2026		75,000			101,275		75,000			97,035
Medium-term notes, 7.59% series, due 2017		25,000			25,350		25,000			26,253
Medium-term notes, 7.78% series, due 2022		25,000			30,610		25,000			29,855
Medium-term notes, 7.92% series, due 2027		25,000			34,190		25,000			31,890
Medium-term notes, 6.76% series, due 2027		7,500			9,404		7,500			8,684
Unamortized discount and debt issuance costs		(9,901	)				(6,137	)

		1,197,599					901,363

Revolving credit facility and commercial paper		—			—		150,000			150,000

Industrial development revenue bonds:
Variable-rate bonds:
Tax-exempt Series A, due 2028		50,000			50,000		50,000			50,000
2003 Series A, due 2038		50,000			50,000		50,000			50,000
2008 Series A, due 2038		50,000			50,000		50,000			50,000
2009 Series A, due 2039		50,000			50,000		50,000			50,000
Fixed-rate bonds:
4.85% 2005 Series A, due 2035		—			—		100,000			100,452
4.75% 2006 Series A, due 2036		—			—		24,855			25,130
Unamortized discount and debt issuance costs		(2,591	)				(3,946	)

		197,409					320,909

Centuri term loan facility		111,612			111,767		112,571			112,665
Unamortized debt issuance costs		(560	)				(692	)

		111,052					111,879

Centuri secured revolving credit facility		79,932			80,479		60,627			60,724
Centuri other debt obligations		56,434			58,553		25,901			26,059

		1,642,426					1,570,679
Less: current maturities		(49,480	)				(19,475	)

Long-term debt, less current maturities	$	1,592,946				$	1,551,204

In March 2016, the Company amended its $300 million credit facility. The facility was previously scheduled to expire in March 2020 and was extended to March 2021. The Company uses $150 million of the facility as long-term debt and the remaining $150 million for working capital purposes. Interest rates for the credit facility are calculated at either the London Interbank Offered Rate (“LIBOR”) or an “alternate base rate,” plus in each case an applicable margin that is determined based on the Company’s senior unsecured debt rating. At September 30, 2016, the applicable margin is 1% for loans bearing interest with reference to LIBOR and 0% for loans bearing interest with reference to the alternative base rate. At September 30, 2016, no borrowings were outstanding on the long-term or short-term portions of the credit facility.

The $100 million 2005 4.85% Series A fixed-rate IDRBs (originally due in 2035) were redeemed at par with accrued interest in July 2016. In September 2016, the $24.9 million 2006 Series A 4.75% fixed-rate IDRBs (originally due in 2036) were redeemed at par with accrued interest.

In September 2016, the Company issued $300 million in 3.8% Senior Notes at a discount of 0.302%. The notes will mature in September 2046. A portion of the net proceeds were used to temporarily pay down amounts outstanding under the credit facility. The remaining net proceeds are intended to be used for general corporate purposes.

Centuri has a $300 million secured revolving credit and term loan facility that is scheduled to expire in October 2019. At September 30, 2016, $192 million in borrowings were outstanding on the Centuri facility. Centuri assets securing the facility at September 30, 2016 totaled $510 million.

In 2016, Centuri entered into equipment loans totaling $45 million due in 2021 under an existing master loan and security agreement.