Pinnacle West Capital Corporation : Pinnacle West Reports 2012 First-Quarter Results
05/03/2012| 08:05am US/Eastern
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Company remains focused on core utility business, operational
excellence and constructive regulatory settlement for benefit of
customers and shareholders
Reduced operating and infrastructure costs more than offset effects
of lower retail sales and milder weather
Pinnacle West Capital Corp. (NYSE: PNW) today reported a consolidated
on-going loss of $7.5 million, or $0.07 per diluted share of common
stock, for the quarter ended March 31, 2012. This result compares with
an on-going loss of $15.8 million or $0.15 per share, in the same 2011
period. The Company's net loss attributable to common shareholders for
the 2012 first quarter was $8.3 million, or $0.08 per diluted share,
compared with a net loss of $15.1 million, or $0.14 per diluted share,
for the same quarter a year ago.
On-going earnings exclude results of discontinued operations related to
the Company's real estate activities and former energy services
business. A reconciliation of reported earnings to on-going earnings is
provided at the end of this release.
"Our employees' attention to operational efficiency and costs more than
offset the effects of milder weather and slightly lower customer usage
and helped produce first-quarter results that were in line with our
expectations," said Pinnacle West Chairman,
President and Chief Executive Officer Don Brandt.
Looking to the immediate future, Brandt added the Company remains
focused on maintaining operational excellence throughout its core
utility business and achieving approval of its proposed retail
regulatory settlement. "The settlement agreement, which is pending
approval by the Arizona Corporation Commission, is a thoughtful solution
that balances disparate stakeholder interests and is a good outcome for
customers and shareholders, alike," he said. Arizona Public Service Co.
(APS) and the other parties have requested the agreement take effect
July 1, 2012.
The 2012 first-quarter on-going results were positively impacted by the
following factors:
Lower operations and maintenance expenses improved earnings by
$0.07 per share compared with the prior-year quarter. The expense
decrease was due primarily to lower fossil power plant maintenance
costs as a result of less work being completed early in the year
compared to 2011.
The O&M variance excludes costs for
renewable energy, demand-side management and similar regulatory
programs, as well as $0.16 per share of expenses associated with a
2011 first-quarter settlement of transmission right-of-way costs, all
of which were essentially offset by comparable amounts of operating
revenues.
Lower infrastructure-related costs contributed $0.03 per share,
primarily related to lower interest, and depreciation and amortization
expenses, partially offset by higher property taxes.
Higher transmission revenues increased earnings by $0.03 per
share, primarily because ofa retail transmission rate increase
implemented in July 2011.
The net effect of miscellaneous items increased earnings $0.02
per share.
These positive factors were partially offset by:
Lower retail electricity sales - excluding the effects of
weather variations - reduced earnings by $0.04 per share compared to
the prior year. Total weather-normalized retail electricity sales
decreased 0.9 percent in the 2012 first quarter compared to the same
period a year ago. The drop in consumption reflects the effects of
APS's energy efficiency programs, partially offset by mildly improving
economic conditions. APS's customer base, however, grew 0.8 percent
over the same timeframe.
The effects of weather variations decreased the Company's
earnings by $0.03 per share.
APS, the Company's principal subsidiary, reported a 2012 first-quarter
net loss attributable to common shareholder of $4.1 million, compared
with a net loss of $12.1 million for the comparable 2011 quarter.
Conference Call and Web Cast
Pinnacle West invites interested parties to listen to the live webcast
of management's conference call to discuss the Company's 2012
first-quarter results, as well as recent developments, at 1:30 p.m. ET
(10:30 a.m. AZ time) today, May 3. The webcast can be accessed at pinnaclewest.com/presentations
and will be available for replay on the website for 30 days. To access
the live conference call by telephone, dial (877) 407-8035 or (201)
689-8035 for international callers. A replay of the call also will be
available until 11:59 p.m. (ET), Thursday, May 10, 2012, by calling
(877) 660-6853 in the U.S. and Canada or (201) 612-7415 internationally
and entering account number 286, followed by conference ID number 392194.
General Information
Pinnacle West Capital, an energy holding company based in Phoenix, has
consolidated assets of about $13.2 billion, more than 6,300 megawatts of
generating capacity and about 6,700 employees in Arizona and New Mexico.
Through its principal subsidiary, Arizona Public Service, the Company
provides retail electricity service to more than 1.1 million Arizona
homes and businesses. For more information about Pinnacle West, visit
the Company's website at pinnaclewest.com.
Dollar amounts in this news release are after income taxes. Earnings per
share amounts are based on average diluted common shares outstanding.
For more information on Pinnacle West's operating statistics and
earnings, please visit pinnaclewest.com/investors.
PINNACLE WEST CAPITAL CORPORATION
NON-GAAP FINANCIAL MEASURE RECONCILIATION
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS
(GAAP MEASURE) TO ON-GOING LOSS
(NON-GAAP FINANCIAL MEASURE)
Three Months Ended March 31, 2012
Three Months Ended March 31, 2011
Dollars in Millions
Diluted EPS
Dollars in Millions
Diluted EPS
Net Loss Attributable to Common Shareholders
$
(8.3
)
$
(0.08
)
$
(15.1
)
$
(0.14
)
Adjustment:
Discontinued real estate and energy services businesses
0.8
0.01
(0.7
)
(0.01
)
On-going Loss
$
(7.5
)
$
(0.07
)
$
(15.8
)
$
(0.15
)
NON-GAAP FINANCIAL INFORMATION
In this press release, we refer to "on-going earnings." On-going
earnings is a "non-GAAP financial measure," as defined in accordance
with SEC rules. We believe on-going earnings provide investors with a
useful indicator of our results that is comparable among periods because
it excludes the effects of unusual items that may occur on an irregular
basis. Investors should note that these non-GAAP financial measures
involve judgments by management, including whether an item is classified
as an unusual item. We use on-going earnings, or similar concepts, to
measure our performance internally in reports for management.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements based on our
current expectations. These forward-looking statements are often
identified by words such as "estimate," "predict," "may," "believe,"
"plan," "expect," "require," "intend," "assume" and similar words.
Because actual results may differ materially from expectations, we
caution readers not to place undue reliance on these statements. A
number of factors could cause future results to differ materially from
historical results, or from outcomes currently expected or sought by
Pinnacle West or APS. These factors include, but are not limited to:
our ability to achieve timely and adequate rate recovery of our costs,
including returns on debt and equity capital;
our ability to manage capital expenditures and other costs while
maintaining reliability and customer service levels;
variations in demand for electricity, including those due to weather,
the general economy, customer and sales growth (or decline), and the
effects of energy conservation measures and distributed generation;
power plant and transmission system performance and outages;
volatile fuel and purchased power costs;
fuel and water supply availability;
regulatory and judicial decisions, developments and proceedings;
new legislation or regulation including those relating to
environmental requirements and nuclear plant operations;
our ability to meet renewable energy and energy efficiency mandates
and recover related costs;
risks inherent in the operation of nuclear facilities, including spent
fuel disposal uncertainty;
competition in retail and wholesale power markets;
the duration and severity of the economic decline in Arizona and
current real estate market conditions;
the cost of debt and equity capital and the ability to access capital
markets when required;
changes to our credit ratings;
the investment performance of the assets of our nuclear
decommissioning trust, pension, and other postretirement benefit plans
and the resulting impact on future funding requirements;
the liquidity of wholesale power markets and the use of derivative
contracts in our business;
potential shortfalls in insurance coverage;
new accounting requirements or new interpretations of existing
requirements;
generation, transmission and distribution facility and system
conditions and operating costs;
the ability to meet the anticipated future need for additional
baseload generation and associated transmission facilities in our
region;
the willingness or ability of our counterparties, power plant
participants and power plant land owners to meet contractual or other
obligations or extend the rights for continued power plant operations;
technological developments affecting the electric industry; and
restrictions on dividends or other provisions in our credit agreements
and Arizona Corporation Commission orders.
These and other factors are discussed in Risk Factors described in Item
1A of the Pinnacle West/APS Annual Report on Form 10-K for the fiscal
year ended December 31, 2011, which readers should review carefully
before placing any reliance on our financial statements or disclosures.
Neither Pinnacle West nor APS assumes any obligation to update these
statements, even if our internal estimates change, except as required by
law.
PINNACLE WEST CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(dollars and shares in thousands, except per share amounts)
THREE MONTHS ENDED
MARCH 31,
2012
2011
Operating Revenues
$
620,631
$
648,847
Operating Expenses
Fuel and purchased power
216,309
212,007
Operations and maintenance
210,663
255,029
Depreciation and amortization
100,109
106,583
Taxes other than income taxes
42,475
37,624
Other expenses
3,068
1,820
Total
572,624
613,063
Operating Income
48,007
35,784
Other
Allowance for equity funds used during construction
4,756
5,395
Other income
760
1,690
Other expense
(4,068
)
(1,741
)
Total
1,448
5,344
Interest Expense
Interest charges
56,967
61,077
Allowance for borrowed funds used during construction
(3,151
)
(3,576
)
Total
53,816
57,501
Loss From Continuing Operations Before Income Taxes
(4,361
)
(16,373
)
Income Taxes
(4,645
)
(6,005
)
Income (Loss) From Continuing Operations
284
(10,368
)
Income (Loss) From Discontinued Operations
Net of Income Taxes
(765
)
694
Net Loss
(481
)
(9,674
)
Less: Net income attributable to noncontrolling interests
7,776
5,461
Net Loss Attributable To Common Shareholders
$
(8,257
)
$
(15,135
)
Weighted-Average Common Shares Outstanding - Basic
109,299
108,832
Weighted-Average Common Shares Outstanding - Diluted
109,299
108,832
Earnings Per Weighted-Average Common Share Outstanding
Loss from continuing operations attributable to common shareholders
- basic
$
(0.07
)
$
(0.15
)
Net loss attributable to common shareholders - basic
$
(0.08
)
$
(0.14
)
Loss from continuing operations attributable to common shareholders
- diluted
$
(0.07
)
$
(0.15
)
Net loss attributable to common shareholders - diluted
$
(0.08
)
$
(0.14
)
Amounts Attributable To Common Shareholders
Loss from continuing operations, net of tax
$
(7,483
)
$
(15,838
)
Discontinued operations, net of tax
(774
)
703
Net loss attributable to common shareholders
$
(8,257
)
$
(15,135
)
Pinnacle West Capital Corp. Media Contact: Alan Bunnell,
602-250-3376 Analyst Contacts: Rebecca Hickman, 602-250-5668 Geoffrey
Wendt, 602-250-5643 Website: pinnaclewest.com
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