FORM 10-Q
Securities and Exchange Commission
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
---------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------- ---------------
Commission file number 1-8962
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PINNACLE WEST CAPITAL CORPORATION
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Arizona 86-0512431
- ------------------------------ ------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 E. Van Buren St., P.O. Box 52132, Phoenix, Arizona 85072-2132
- -------------------------------------------------------------------------------
(Address of principal executive
offices) (Zip Code)
Registrant's telephone number, including area code: (602) 379-2500
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(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Number of shares of common stock, no par value, outstanding as
of May 1, 1995: 87,399,103
<PAGE>
-i-
Glossary
ACC - Arizona Corporation Commission
AFUDC - Allowance for funds used during construction
APS - Arizona Public Service Company
Company - Pinnacle West Capital Corporation
CSW - Central and South West Corporation
El Dorado - El Dorado Investment Company
EPA - Environmental Protection Agency
EPEC - El Paso Electric Company
Four Corners - Four Corners Power Plant
ITCs - Investment tax credits
1994 10-K - Pinnacle West Capital Corporation Annual Report on
Form 10-K for the fiscal year ended December 31, 1994
Palo Verde - Palo Verde Nuclear Generating Station
Pinnacle West - Pinnacle West Capital Corporation
SFAS No. 71 - Statement of Financial Accounting Standards
No. 71, "Accounting for the Effects of Certain
Types of Regulation"
SFAS No. 121 - Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be
Disposed Of"
SunCor - SunCor Development Company
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements.
PINNACLE WEST CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended
March 31,
1995 1994
------------ ------------
Operating Revenues
Electric $ 336,968 $ 346,049
Real estate 9,146 9,424
------------ ------------
Total 346,114 355,473
------------ ------------
Fuel Expenses
Fuel for electric generation 46,710 57,968
Purchased power 8,210 10,063
------------ ------------
Total 54,920 68,031
------------ ------------
Operating Expenses
Utility operations and maintenance 91,432 97,621
Real estate operations 7,495 8,661
Depreciation and amortization 60,847 58,195
Taxes other than income taxes 35,721 34,495
------------ ------------
Total 195,495 198,972
------------ ------------
Operating Income 95,699 88,470
------------ ------------
Other Income (Deductions)
Allowance for equity funds used
during construction 1,186 846
Palo Verde accretion income -- 19,980
Interest on long-term debt (54,920) (56,364)
Other interest (3,236) (3,987)
Allowance for borrowed funds used
during construction 1,996 1,167
Preferred stock dividend requirements of APS (4,807) (7,510)
Other-net 4,592 230
------------ ------------
Total (55,189) (45,638)
------------ ------------
Income Before Income Taxes 40,510 42,832
Income Tax Expense 15,887 21,213
------------ ------------
Net Income $ 24,623 $ 21,619
============ ============
Average Common Shares Outstanding 87,393,085 87,418,161
Earnings Per Average Common Share Outstanding $ 0.28 $ 0.25
============ ============
Dividends Declared Per Share $ 0.225 $ 0.200
============ ============
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
PINNACLE WEST CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share amounts)
Twelve Months Ended
March 31,
1995 1994
------------ ------------
Operating Revenues
Electric $ 1,617,087 $ 1,594,572
Real estate 58,975 37,873
------------ ------------
Total 1,676,062 1,632,445
------------ ------------
Fuel Expenses
Fuel for electric generation 225,845 234,394
Purchased power 61,733 68,679
------------ ------------
Total 287,578 303,073
------------ ------------
Operating Expenses
Utility operations and maintenance 405,732 407,726
Real estate operations 58,623 43,011
Depreciation and amortization 239,978 226,027
Taxes other than income taxes 143,152 138,820
------------ ------------
Total 847,485 815,584
------------ ------------
Operating Income 540,999 513,788
------------ ------------
Other Income (Deductions)
Allowance for equity funds used
during construction 4,281 2,520
Palo Verde accretion income 13,616 76,870
Interest on long-term debt (228,366) (240,907)
Other interest (14,434) (16,604)
Allowance for borrowed funds used
during construction 6,271 4,434
Preferred stock dividend requirements of APS (22,571) (30,461)
Other-net 21,471 (2,340)
------------ ------------
Total (219,732) (206,488)
------------ ------------
Income Before Income Tax 321,267 307,300
------------ ------------
Income Tax Expense (Benefit)
Income tax expense 144,414 143,177
Non-recurring income tax benefit (26,770) --
------------ ------------
Total 117,644 143,177
------------ ------------
Net Income $ 203,623 $ 164,123
============ ============
Average Common Shares Outstanding 87,405,051 87,305,670
Earnings Per Average Common Share Outstanding $ 2.33 $ 1.88
============ ============
Dividends Declared Per Share $ 0.850 $ 0.400
============ ============
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
PINNACLE WEST CAPITAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
(Thousands of Dollars)
March 31, December 31,
1995 1994
------------ ------------
Current Assets
Cash and cash equivalents $ 20,654 $ 34,719
Customer and other receivables--net 111,284 136,143
Accrued utility revenues 45,547 55,432
Material and supplies 90,872 89,864
Fossil fuel 35,762 35,735
Deferred income taxes 66,066 68,263
Other current assets 18,653 15,422
----------- -----------
Total current assets 388,838 435,578
----------- -----------
Investments and Other Assets
Real estate investments--net 414,157 408,505
Other assets 156,025 153,384
----------- -----------
Total investments and other assets 570,182 561,889
----------- -----------
Utility Plant
Electric plant in service, including
nuclear fuel 6,650,844 6,602,799
Construction work in progress 234,865 224,312
----------- -----------
Total utility plant 6,885,709 6,827,111
Less accumulated depreciation and
amortization 2,263,432 2,203,038
----------- -----------
Net utility plant 4,622,277 4,624,073
----------- -----------
Deferred Debits
Regulatory asset for income taxes 555,004 557,049
Palo Verde Unit 3 cost deferral 290,296 292,586
Palo Verde Unit 2 cost deferral 170,421 171,936
Other deferred debits 277,097 266,641
----------- -----------
Total deferred debits 1,292,818 1,288,212
----------- -----------
Total Assets $ 6,874,115 $ 6,909,752
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
PINNACLE WEST CAPITAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
LIABILITIES AND EQUITY
(Thousands of Dollars)
March 31, December 31,
1995 1994
------------ ------------
Current Liabilities
Accounts payable $ 88,890 $ 126,842
Accrued taxes 137,661 89,144
Accrued interest 38,938 56,058
Short-term borrowings 80,500 131,500
Current maturities of long-term debt 129,923 78,512
Other current liabilities 61,354 50,060
---------- ----------
Total current liabilities 537,266 532,116
---------- ----------
Non-Current Liabilities
Long-term debt less current maturities 2,550,044 2,588,525
Other liabilities 10,188 8,679
---------- ----------
Total non-current liabilities 2,560,232 2,597,204
---------- ----------
Deferred Credits and Other
Deferred income taxes 1,297,587 1,297,298
Deferred investment tax credit 118,596 121,426
Unamortized gain - sale of utility plant 96,352 98,551
Other deferred credits 214,224 218,179
---------- ----------
Total deferred credits and other 1,726,759 1,735,454
---------- ----------
Commitments and Contingencies (Notes 6, 7 and 8)
Minority Interests
Non-redeemable preferred stock of APS 193,561 193,561
---------- ----------
Redeemable preferred stock of APS 75,000 75,000
---------- ----------
Common Stock Equity
Common stock, no par value 1,641,118 1,641,196
Retained earnings 140,179 135,221
---------- ----------
Total common stock equity 1,781,297 1,776,417
---------- ----------
Total Liabilities and Equity $6,874,115 $6,909,752
========== ==========
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
PINNACLE WEST CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(THOUSANDS OF DOLLARS)
Three Months Ended
March 31,
1995 1994
---------- ----------
Cash Flows From Operating Activities
Income from continuing operations $ 24,623 $ 21,619
Items not requiring cash
Depreciation and amortization 68,705 65,030
Deferred income taxes--net 4,531 16,580
Provision for rate refund -- (5,344)
Palo Verde accretion income -- (19,980)
Other--net (278) (1,665)
Changes in current assets and liabilities
Accounts receivable--net 24,770 22,216
Accrued utility revenues 9,885 12,115
Materials, supplies and fossil fuel (1,035) 4,412
Other current assets (3,231) (2,214)
Accounts payable (29,756) (18,785)
Accrued taxes 48,517 37,886
Accrued interest (17,120) (9,756)
Other current liabilities 14,377 12,443
Decrease (increase) in land held (6,539) 2,322
Other--net (16,106) 860
--------- ---------
Net Cash Flow Provided By Operating Activities 121,343 137,739
--------- ---------
Cash Flows From Investing Activities
Capital expenditures (72,730) (68,684)
Allowance for equity funds used during construction 1,186 846
Other--net 19 (1,101)
--------- ---------
Net Cash Flow Used For Investing Activities (71,525) (68,939)
--------- ---------
Cash Flows From Financing Activities
Issuance of long-term debt 81,811 123,899
Short-term borrowings--net (51,000) (69,000)
Dividends paid on common stock (19,665) (17,486)
Repayment of long-term debt (74,951) (68,823)
Redemption of preferred stock (4) (14,225)
Other--net (74) 197
--------- ---------
Net Cash Flow Used For Financing Activities (63,883) (45,438)
--------- ---------
Net Cash Flow (14,065) 23,362
Cash and Cash Equivalents at Beginning of Period 34,719 52,127
--------- ---------
Cash and Cash Equivalents at End of Period $ 20,654 $ 75,489
========= =========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest, net of amounts capitalized $ 72,085 $ 65,889
Income taxes $ -- $ --
See Notes to Condensed Consolidated Financial Statements.
PINNACLE WEST CAPITAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The condensed consolidated financial statements include the accounts of
Pinnacle West and its subsidiaries: APS, SunCor, and El Dorado. All significant
intercompany balances have been eliminated. Consistent with the 1995
presentation, prior year's electric operating revenues and other taxes have been
restated to exclude sales tax on electric revenues.
2. In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting of normal
recurring accruals) necessary to present fairly the financial position of
Pinnacle West and its subsidiaries as of March 31, 1995, the results of
operations for the three months and twelve months ended March 31, 1995 and 1994,
and the cash flows for the three months ended March 31, 1995 and 1994. It is
suggested that these condensed consolidated financial statements and notes to
condensed consolidated financial statements be read in conjunction with the
consolidated financial statements and notes to consolidated financial statements
included in the 1994 10-K.
3. The operations of APS are subject to seasonal fluctuations, with variations
occurring in energy usage by customers from season to season and from month to
month within a season, primarily as a result of changing weather conditions. For
this and other reasons, Pinnacle West's consolidated results of operations for
interim periods are not necessarily indicative of the results to be expected for
the full year.
4. See "Liquidity and Capital Resources" in Part I, Item 2 of this report for
changes in capitalization since December 31, 1994.
5. In May 1994, the ACC approved a retail rate settlement agreement between APS
and the ACC staff which provided for a net annual retail rate reduction of
approximately $32.3 million ($19 million after tax), or 2.2% on average,
effective June 1, 1994. As part of the settlement, APS reversed approximately
$20 million of depreciation ($15 million after tax) related to a 1991 Palo Verde
write-off. The 1994 rate settlement also provided for the accelerated
amortization of substantially all deferred ITCs over a five-year period
beginning in 1995. In addition, the 1994 rate settlement included a moratorium
on filing for permanent rate changes, except under certain circumstances, prior
to the end of 1996 for both APS and the ACC staff, and an incentive rewarding
reduction in fuel and operating and maintenance cost per kilowatt-hour below
established targets.
6. The Palo Verde participants have insurance for public liability payments
resulting from nuclear energy hazards to the full limit of liability under
federal law. This potential liability is covered by primary liability insurance
provided by commercial insurance carriers in the amount of $200 million and the
balance by an industry-wide retrospective assessment program. The maximum
assessment per reactor under the retrospective rating program for each nuclear
incident is approximately $79 million, subject to an annual limit of $10 million
per incident. Based upon APS' 29.1% interest in the three Palo Verde units, APS'
maximum potential assessment per incident is approximately $69 million, with an
annual payment limitation of approximately $9 million.
The Palo Verde participants maintain "all risk" (including nuclear
hazards) insurance for property damage to, and decontamination of, property at
Palo Verde in the aggregate amount of $2.78 billion, a substantial portion of
which must first be applied to stabilization and decontamination. APS has also
secured insurance against portions of any increased cost of generation or
purchased power and business interruption resulting from a sudden and unforeseen
outage of any of the three units. The insurance coverage discussed in this and
the previous paragraph is subject to certain policy conditions and exclusions.
7. APS has encountered tube cracking in the Palo Verde steam generators and has
taken, and will continue to take, remedial actions that it believes have slowed
further tube problems to manageable levels. Although the steam generators are
capable of operating for their designed life of 40 years, APS believes that, at
some point, long-term economic considerations could make steam generator
replacement desirable.
8. El Paso Electric Company, one of the joint owners of Palo Verde and Four
Corners, has been operating under Chapter 11 of the Bankruptcy Code since 1992.
A plan whereby EPEC would become a wholly-owned subsidiary of Central and South
West Corporation has been confirmed by the bankruptcy court, but cannot become
fully effective until several other approvals are obtained. Under the plan,
certain issues, including EPEC allegations regarding the 1989-1990 Palo Verde
outages, would be resolved, and EPEC would assume the joint facilities operating
agreements. CSW has stated that several matters have arisen which may impede
completion of the merger. If the plan is not approved, APS does not expect that
there would be a material adverse effect on its operations or financial
position.
<PAGE>
PINNACLE WEST CAPITAL CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion relates to Pinnacle West and its subsidiaries:
APS, SunCor and El Dorado.
LIQUIDITY AND CAPITAL RESOURCES
Pinnacle West
Pinnacle West's cash requirements and its ability to fund those
requirements are discussed under "Liquidity and Capital Resources" in
Management's Discussion and Analysis of Financial Condition and Results of
Operations in Part II, Item 7 of the 1994 10-K.
During March 1995, Pinnacle West prepaid $15 million of its debt,
reducing the aggregate principal amount of its outstanding debt to approximately
$415 million.
The Board declared a quarterly dividend of 22.5 cents per share of
common stock, payable on March 1, 1995 to shareholders of record on February 1,
1995, totaling approximately $19.7 million.
APS
For the three months ended March 31, 1995, APS incurred approximately
$61 million in construction expenditures, accounting for approximately 20% of
the most recently estimated 1995 construction expenditures. APS has estimated
total construction expenditures for the years 1995, 1996, and 1997 to be
approximately $300 million, $257 million, and $236 million, respectively. These
amounts include about $27 million each year for nuclear fuel expenditures.
Since December 31, 1994, APS has (i) issued $75 million of its Junior
Subordinated Deferrable Interest Debentures ("MIDS"), (ii) incurred
approximately $4 million of long-term debt in connection with a tax-exempt
financing, (iii) redeemed on March 2, 1995, $49.15 million of its First Mortgage
Bonds, 10.25% Series due 2000, (iv) repurchased on March 17, 1995, approximately
$2.5 million of its First Mortgage Bonds, 9 1/2% Series due 2021, and (v)
redeemed on May 1, 1995, $50 million of its First Mortgage Bonds, 13 1/4% Series
due 2007 (the "13 1/4% Bonds").
Refunding obligations for preferred stock and long-term debt, a
capitalized lease obligation, and certain actual and anticipated early
redemptions, including premiums thereon, are expected to total approximately
$109 million, $4 million, and $164 million for the years 1995, 1996, and 1997,
respectively. During the first three months of 1995, APS refunded approximately
$52 million (48%) of the estimated 1995 total.
Provisions in APS' mortgage bond indenture and articles of
incorporation require certain coverage ratios to be met before it can issue
additional first mortgage bonds or preferred stock. In addition, the bond
indenture limits the amount of additional first mortgage bonds which may be
issued to a percentage of net property additions, to the amount of certain first
mortgage bonds that have been redeemed or retired, and/or to cash deposited with
the mortgage bond trustee. As of March 31, 1995, and adjusting for the (i)
incurrence of approximately $4 million of long-term debt in connection with a
tax-exempt financing and (ii) redemption of the 13 1/4% Bonds, APS estimates
that the mortgage bond indenture and the articles of incorporation would have
allowed it to issue up to approximately $1.417 billion and $928 million of
additional first mortgage bonds and preferred stock, respectively.
The ACC has authority over APS with respect to the issuance of
long-term debt and equity securities. Existing ACC orders allow APS to have up
to approximately $2.6 billion in long-term debt and approximately $501 million
of preferred stock outstanding at any one time.
Management does not expect any of the foregoing restrictions to limit
APS' ability to meet its capital requirements.
OPERATING RESULTS
The following table shows the income and/or loss of Pinnacle West and its
subsidiaries for the three-month and twelve-month periods ended March 31, 1995
and 1994:
Income (Loss)
(Unaudited)
(Thousands of Dollars)
Three Months Ended Twelve Months Ended
March 31, March 31,
1995 1994 1995 1994
---------- ---------- ---------- ----------
APS $ 33,025 $ 30,958 $ 220,279 $ 211,227
SunCor 1,167 964 742 (3,364)
El Dorado (857) (426) (4,438) (4,145)
Pinnacle West (1) (8,712) (9,877) (12,960) (39,595)
---------- ---------- ---------- ----------
NET INCOME $ 24,623 $ 21,619 $ 203,623 $ 164,123
========== ========== ========== ==========
(1) Includes Pinnacle West's interest expense and operating expenses net of
income tax benefits. Income tax benefits are as follows (in thousands):
$3,994 and $6,726 for the three months ended March 31, 1995 and 1994,
respectively; and $51,565 and $39,447 for the twelve months ended March 31,
1995 and 1994, respectively.
APS
Operating Results - Three-month period ended March 31, 1995 compared to
three-month period ended March 31, 1994
Earnings increased in the three-month period ended March 31, 1995
primarily due to lower fuel costs, lower operations and maintenance expenses, a
gain recognized on the sale of a small subsidiary, and lower preferred stock
dividends. Fuel expense was lower due largely to lower average fuel costs
resulting from increased nuclear generation and lower natural gas and coal
prices. Operations and maintenance expenses decreased due to improved Palo Verde
operations and lower fossil plant overhaul costs. Preferred stock dividends
decreased due to less preferred stock outstanding. Partially offsetting these
positive factors were decreased operating revenues and the absence of non-cash
income related to a 1991 rate settlement, which APS completed recording in May
1994 (see "Other Income" below). Operating revenues were down primarily due to
milder weather and a retail rate reduction which became effective June 1, 1994
(see Note 5 of Notes to Condensed Consolidated Financial Statements in Part I,
Item 1 of this report), partially offset by customer growth. The effects of the
rate reduction were substantially offset by the accelerated amortization of
investment tax credits provided for in the 1994 rate settlement.
Operating Results - Twelve-month period ended March 31, 1995 compared to
twelve-month period ended March 31, 1994
Earnings increased in the twelve-month period ended March 31, 1995
primarily due to increased operating revenues, lower fuel expenses, and lower
preferred stock dividends. Operating revenues were up due to customer growth and
warmer weather, partially offset by a retail rate reduction which became
effective June 1, 1994. The effects of the rate reduction were offset by the
reversal of certain previously recorded depreciation related to Palo Verde (see
Note 5 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1
of this report) and the accelerated amortization of investment tax credits.
Although sales were up, fuel expenses were down primarily due to lower average
fuel costs resulting from increased nuclear generation. Preferred stock
dividends were lower due to less preferred stock outstanding. Partially
offsetting these positive factors were the decrease in non-cash income related
to the 1991 rate settlement (see "Other Income" below) and increased
depreciation expense. Depreciation expense was up primarily due to higher plant
balances and increased nuclear decommissioning costs reflecting the most recent
site-specific study.
Non-utility Operations
Pinnacle West's interest expense decreased in the three-month and twelve-month
periods as it continued to prepay its outstanding debt. Earnings increased in
the twelve-month period due to a non-recurring income tax benefit of
approximately $26.8 million related to a change in tax law.
SunCor's earnings in the twelve-month period were positively impacted by
increased land sales.
El Dorado's earnings decreased in the three-month and twelve-month periods due
to lower earnings on venture capital investments.
Other Income
Other income reflects accounting practices required for regulated
public utilities and represents a composite of cash and non-cash items,
including AFUDC. For the three months ended March 31, 1995, other income
included a gain of about $5 million on APS' sale of a small subsidiary. Included
in other income for the twelve months ended March 31, 1995, were $8.2 million of
after-tax accretion income on Palo Verde Unit 3 and a one-time depreciation
reversal related to Palo Verde of approximately $15.0 million, after tax. See
Note 5 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1
of this report.
Other non-cash income, in the twelve months ended March 31, 1995,
included $2.4 million of after-tax income (included in operating revenues) from
the reversal of the Palo Verde refund obligation which was recorded in
accordance with the 1991 rate settlement. APS has recorded all of the Unit 3
accretion income and refund reversals related to the 1991 rate settlement. See
Note 1 of Notes to Consolidated Financial Statements in Part II, Item 8 of the
1994 10-K.
Accounting Issue
In March 1995 the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," which is effective in 1996. This statement requires
that long-lived assets be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An
impairment loss would be recognized if the sum of the estimated future
undiscounted cash flows to be generated by an asset is less than its carrying
value. The amount of the loss would be based on a comparison of book value to
fair value. The standard also amends SFAS No. 71, "Accounting for the Effects of
Certain Types of Regulation," to require write-off of a regulatory asset if it
is no longer probable that future revenues will recover the cost of the asset.
This new standard does not impact the Company at this time; however, it will be
reviewed on an ongoing basis.
COMPETITION
A significant challenge for APS will be how well it is able to respond
to increasingly competitive conditions in the electric utility industry, while
continuing to earn an acceptable return for its shareholders. Strategies
emphasize managing costs, stabilizing electric rates, negotiating long-term
contracts with large customers and capitalizing on the growth characteristics of
its service territory.
One of the issues that must be addressed responsibly is the recovery in
a more competitive environment of the carrying value of assets acquired or
recorded under the existing regulatory environment.
Pursuant to the 1994 rate settlement, APS and the ACC staff will
develop certain procedures that are responsive to the competitive forces in
larger customer segments, with the objective of making joint recommendations to
the ACC in 1995. A separate ACC proceeding on competition was opened by the ACC
in mid-1994 and is expected to continue for some months.
As the forces of competition continue to impact the industry, it will
become clearer as to what customer sectors and what regions will be most
affected and what strategies are best to deal with those forces.
PART II - OTHER INFORMATION
The following information relates primarily to Pinnacle West Capital
Corporation (the "Company") and its principal subsidiary, Arizona Public Service
Company ("APS").
ITEM 5. Other Information
Environmental Matters
As previously reported, on November 24, 1994, the United States Court of
Appeals for the District of Columbia Circuit vacated the rules for nitrogen
oxides emissions limitations and remanded them to the EPA for further
consideration. See "Business of Arizona Public Service Company - Environmental
Matters" in Part I, Item 1 of the 1994 10-K. On March 28, 1995, the EPA issued
revised rules for nitrogen oxides emissions limitations, which will require APS
to install additional pollution control equipment at Four Corners. In the year
2000 Four Corners must comply with either these or more stringent requirements
which might be promulgated by the EPA. The EPA has until 1997 to set more
stringent requirements. Based on its initial evaluation, APS currently estimates
its capital cost of complying with the March 28 rules will be approximately $20
million, most of which will be incurred in 1997.
As previously reported, the EPA established a "Grand Canyon Visibility
Transport Commission" to complete a study by November 1995 on visibility
impairment in the "Golden Circle of National Parks" in the Colorado Plateau.
See "Business of Arizona Public Service Company - Environmental Matters" in
Part I, Item 1 of the 1994 10-K. The EPA recently agreed to the extension of
the completion of this study until March or April 1996.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
27 Financial Data Schedule
(b) Reports on Form 8-K
During the quarter ended March 31, 1995, and the period ended May 12,
1995, the Company did not file any reports on Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PINNACLE WEST CAPITAL CORPORATION
(Registrant)
Dated: May 15, 1995 By: Henry Sargent
----------------------------- -----------------------------
Henry Sargent
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer
and Officer Duly Authorized
to sign this Report)
<TABLE> <S> <C>
<ARTICLE> UT
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 4,622,277
<OTHER-PROPERTY-AND-INVEST> 570,182
<TOTAL-CURRENT-ASSETS> 388,838
<TOTAL-DEFERRED-CHARGES> 1,292,818
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 6,874,115
<COMMON> 1,641,118
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 140,179
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,781,297
75,000
193,561
<LONG-TERM-DEBT-NET> 2,550,044
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 80,500
<LONG-TERM-DEBT-CURRENT-PORT> 129,923
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,063,790
<TOT-CAPITALIZATION-AND-LIAB> 6,874,115
<GROSS-OPERATING-REVENUE> 346,114
<INCOME-TAX-EXPENSE> 15,887
<OTHER-OPERATING-EXPENSES> 195,495
<TOTAL-OPERATING-EXPENSES> 250,415
<OPERATING-INCOME-LOSS> 95,699
<OTHER-INCOME-NET> (55,189)
<INCOME-BEFORE-INTEREST-EXPEN> 0
<TOTAL-INTEREST-EXPENSE> 56,160
<NET-INCOME> 24,623
0
<EARNINGS-AVAILABLE-FOR-COMM> 24,623
<COMMON-STOCK-DIVIDENDS> 19,665
<TOTAL-INTEREST-ON-BONDS> 53,358
<CASH-FLOW-OPERATIONS> 121,343
<EPS-PRIMARY> 0.28
<EPS-DILUTED> 0
</TABLE>
