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, 1996
---------------------------
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
---------------
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
- --------------------------------------------------------------------------------
(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 14, 1996: 87,432,153
<PAGE>
- i -
Glossary
--------
ACC - Arizona Corporation Commission
ACC Staff - Staff of the Arizona Corporation Commission
AFUDC - Allowance for funds used during construction
APS - Arizona Public Service Company
Company - Pinnacle West Capital Corporation
El Dorado - El Dorado Investment Company
EPA - Environmental Protection Agency
ITCs - Investment tax credits
1995 10-K - Pinnacle West Capital Corporation Annual Report on Form 10-K for the
fiscal year ended December 31, 1995
Palo Verde - Palo Verde Nuclear Generating Station
Pinnacle West - Pinnacle West Capital Corporation
PRP's - Potentially Responsible Parties
SEC - Securities and Exchange Commission
SunCor - SunCor Development Company
Superfund - Comprehensive Environmental Response, Compensation and Liability Act
<PAGE>
PART I. FINANCIAL INFORMATION
-----------------------------
Item 1. Financial Statements.
- -----------------------------
PINNACLE WEST CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
-------------------------------------------
(Unaudited)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
---------- ----------
<S> <C> <C>
Operating Revenues
Electric $ 345,261 $ 336,968
Real estate 15,994 9,146
---------- ----------
Total 361,255 346,114
---------- ----------
Fuel Expenses
Fuel for electric generation 42,334 46,710
Purchased power 13,938 8,210
---------- ----------
Total 56,272 54,920
---------- ----------
Operating Expenses
Utility operations and maintenance 87,743 91,432
Real estate operations 17,542 7,495
Depreciation and amortization 58,935 60,847
Taxes other than income taxes 34,201 35,721
---------- ----------
Total 198,421 195,495
---------- ----------
Operating Income 106,562 95,699
---------- ----------
Other Income (Deductions)
Allowance for equity funds used during construction 1,675 1,186
Interest on long-term debt (45,909) (54,920)
Other interest (4,846) (3,236)
Allowance for borrowed funds used during construction 3,237 1,996
Preferred stock dividend requirements of APS (4,477) (4,807)
Other-net 1,667 4,592
---------- ----------
Total (48,653) (55,189)
---------- ----------
Income Before Income Taxes and Extraordinary Charge 57,909 40,510
Income Tax Expense 23,050 15,887
---------- ----------
Income Before Extraordinary Charge 34,859 24,623
Extraordinary Charge for Early Retirement of Debt -
Net of Income Tax of $2,437 (3,597) --
---------- ----------
Net Income $ 31,262 $ 24,623
========== ==========
Average Common Shares Outstanding 87,450,355 87,393,085
Earnings Per Average Common Share Outstanding
Income before extraordinary charge $ 0.40 $ 0.28
Extraordinary charge (0.04) --
---------- ----------
Total $ 0.36 $ 0.28
========== ==========
Dividends Declared Per Share $ 0.250 $ 0.225
========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
1
<PAGE>
PINNACLE WEST CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
-------------------------------------------
(Unaudited)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Twelve Months Ended
March 31,
1996 1995
----------- -----------
<S> <C> <C>
Operating Revenues
Electric $ 1,623,245 $ 1,617,087
Real estate 61,694 58,975
----------- -----------
Total 1,684,939 1,676,062
----------- -----------
Fuel Expenses
Fuel for electric generation 204,552 225,845
Purchased power 66,598 61,733
----------- -----------
Total 271,150 287,578
----------- -----------
Operating Expenses
Utility operations and maintenance 397,125 405,732
Real estate operations 60,391 58,623
Depreciation and amortization 242,077 239,978
Taxes other than income taxes 140,909 143,152
----------- -----------
Total 840,502 847,485
----------- -----------
Operating Income 573,287 540,999
----------- -----------
Other Income (Deductions)
Allowance for equity funds used during construction 5,471 4,281
Palo Verde accretion income -- 13,616
Interest on long-term debt (200,282) (228,366)
Other interest (18,585) (14,434)
Allowance for borrowed funds used during construction 10,306 6,271
Preferred stock dividend requirements of APS (18,804) (22,571)
Other-net (6,421) 21,471
----------- -----------
Total (228,315) (219,732)
----------- -----------
Income Before Income Taxes and Extraordinary Charge 344,972 321,267
----------- -----------
Income Taxes
Income tax expense 135,128 144,414
Non-recurring income tax benefit -- (26,770)
----------- -----------
Total 135,128 117,644
----------- -----------
Income Before Extraordinary Charge 209,844 203,623
Extraordinary Charge for Early Retirement of Debt -
Net of Income Tax of $10,271 (15,168) --
----------- -----------
Net Income $ 194,676 $ 203,623
=========== ===========
Average Common Shares Outstanding 87,433,201 87,405,051
Earnings Per Average Common Share Outstanding
Income before extraordinary charge $ 2.40 $ 2.33
Extraordinary charge (0.17) --
----------- -----------
Total $ 2.23 $ 2.33
=========== ===========
Dividends Declared Per Share $ 0.950 $ 0.850
=========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
2
<PAGE>
PINNACLE WEST CAPITAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Unaudited)
ASSETS
------
(Thousands of Dollars)
March 31, December 31,
1996 1995
---------- ----------
Current Assets
Cash and cash equivalents $ 37,111 $ 79,539
Customer and other receivables--net 109,127 131,393
Accrued utility revenues 44,090 53,519
Material and supplies 77,660 78,271
Fossil fuel 21,284 21,722
Deferred income taxes 46,339 46,355
Other current assets 30,856 19,671
---------- ----------
Total current assets 366,467 430,470
---------- ----------
Investments and Other Assets
Real estate investments--net 418,785 411,693
Other assets 160,311 151,127
---------- ----------
Total investments and other assets 579,096 562,820
---------- ----------
Utility Plant
Electric plant in service and held for future use 6,559,022 6,544,860
Less accumulated depreciation and
amortization 2,279,736 2,231,614
---------- ----------
Total 4,279,286 4,313,246
Construction work in progress 300,552 281,757
Nuclear fuel, net of amortization 59,788 52,084
---------- ----------
Net utility plant 4,639,626 4,647,087
---------- ----------
Deferred Debits
Regulatory asset for income taxes 546,881 548,464
Palo Verde Unit 3 cost deferral 281,135 283,426
Palo Verde Unit 2 cost deferral 164,358 165,873
Other deferred debits 364,158 358,912
---------- ----------
Total deferred debits 1,356,532 1,356,675
---------- ----------
Total Assets $6,941,721 $6,997,052
========== ==========
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
PINNACLE WEST CAPITAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Unaudited)
LIABILITIES AND EQUITY
----------------------
(Thousands of Dollars)
March 31, December 31,
1996 1995
---------- -----------
Current Liabilities
Accounts payable $ 81,862 $ 114,963
Accrued taxes 153,351 95,962
Accrued interest 30,911 48,958
Short-term borrowings 159,600 177,800
Current maturities of long-term debt 167,242 8,780
Customer deposits 35,437 32,746
Other current liabilities 31,499 25,284
----------- -----------
Total current liabilities 659,902 504,493
----------- -----------
Long-Term Debt Less Current Maturities 2,309,891 2,510,709
----------- -----------
Deferred Credits and Other
Deferred income taxes 1,327,601 1,327,881
Deferred investment tax credit 93,470 97,897
Unamortized gain - sale of utility plant 90,371 91,514
Other 324,093 314,910
----------- -----------
Total deferred credits and other 1,835,535 1,832,202
----------- -----------
Commitments and Contingencies (Notes 6 and 7)
Minority Interests
Non-redeemable preferred stock of APS 174,089 193,561
----------- -----------
Redeemable preferred stock of APS 72,000 75,000
----------- -----------
Common Stock Equity
Common stock, no par value 1,638,496 1,638,684
Retained earnings 251,808 242,403
----------- -----------
Total common stock equity 1,890,304 1,881,087
----------- -----------
Total Liabilities and Equity $ 6,941,721 $ 6,997,052
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
PINNACLE WEST CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Unaudited)
(THOUSANDS OF DOLLARS)
Three Months Ended
March 31,
1996 1995
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Income before extraordinary charge $ 34,859 $ 24,623
Items not requiring cash
Depreciation and amortization 67,538 68,705
Deferred income taxes--net 1,319 4,531
Allowance for equity funds used during
construction (1,675) (1,186)
Deferred investment tax credit (4,427) (2,830)
Other--net (1,432) 3,738
Changes in current assets and liabilities
Customer and other receivables - net 22,528 24,770
Accrued utility revenues 9,429 9,885
Materials, supplies and fossil fuel 1,049 (1,035)
Other current assets (441) (3,231)
Accounts payable (34,440) (29,756)
Accrued taxes 57,389 48,517
Accrued interest (18,047) (17,120)
Other current liabilities 13,013 14,377
Decrease (increase) in land held 2,975 (6,539)
Other--net 9,539 (16,106)
---------- ----------
Net Cash Flow Provided By Operating Activities 159,176 121,343
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (60,138) (69,548)
Allowance for borrowed funds used during
construction (3,237) (1,996)
Sale of property 2,824 --
Other--net (10,852) 19
---------- ----------
Net Cash Flow Used For Investing Activities (71,403) (71,525)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of long-term debt 33,511 81,811
Short-term borrowings--net (18,200) (51,000)
Dividends paid on common stock (21,857) (19,665)
Repayment of long-term debt (97,398) (74,951)
Redemption of preferred stock (23,410) (4)
Extraordinary charge for early retirement of debt (3,597) --
Other--net 750 (74)
---------- ----------
Net Cash Flow Used For Financing Activities (130,201) (63,883)
---------- ----------
Net Cash Flow (42,428) (14,065)
Cash and Cash Equivalents at Beginning of Period 79,539 34,719
---------- ----------
Cash and Cash Equivalents at End of Period $ 37,111 $ 20,654
========== ==========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest, net of amounts capitalized $ 63,039 $ 72,085
Income taxes $ -- $ --
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
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. Certain prior year balances have
been restated to conform to the current year presentation.
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, 1996, the results of
operations for the three months and twelve months ended March 31, 1996 and 1995,
and the cash flows for the three months ended March 31, 1996 and 1995. 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 1995 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, the 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 for the three months ended March 31, 1996.
5. Regulatory Matters
Regulatory Agreement
In April 1996 the ACC approved a regulatory agreement between APS and
the ACC Staff. This agreement is substantially the same as the agreement
proposed by APS and the ACC Staff in December 1995. The major provisions of the
1996 regulatory agreement are:
* An annual rate reduction of approximately $48.5 million ($29 million
after income taxes), or an average 3.4% for all customers except certain
contract customers, effective July 1, 1996.
* Recovery of substantially all of APS' present regulatory assets through
accelerated amortization over an eight-year period beginning July 1,
1996, increasing annual amortization by approximately $120 million ($72
million after income taxes).
6
<PAGE>
* A formula for sharing future cost savings between customers and
shareholders, referencing a return on equity (as defined) of 11.25%.
* A moratorium on filing for permanent rate changes, except under the
sharing formula and under certain other limited circumstances, prior to
July 2, 1999.
* Infusion of $200 million of common equity into APS by the parent company,
in annual increments of $50 million starting in 1996.
In recognition of evolving competition in the electric utility industry
and an ongoing investigation by the ACC Staff into industry restructuring in an
open competition docket involving many parties, the agreement also includes an
element setting out a number of issues which APS and the ACC Staff agree the ACC
should be requested to consider in developing restructuring policies. See Note 3
of Notes to Consolidated Financial Statements in Part II, Item 8 of the 1995
10-K for further discussion of the industry restructuring element of the
agreement.
1994 Settlement Agreement
In May 1994 the ACC approved a retail rate settlement agreement which
provided for a net annual retail rate reduction of approximately $32 million
($19 million after income taxes), or 2.2% on average, effective June 1, 1994. As
part of the settlement, in 1994 APS reversed approximately $20 million of
depreciation ($15 million after income taxes) 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, resulting in a decrease in annual consolidated income tax
expense of approximately $18 million.
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. If losses at any
nuclear power plant covered by this program exceed the accumulated funds for
this program, APS could be assessed retrospective premium adjustments. The
maximum assessment per reactor under the 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 $2.75 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.
7
<PAGE>
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
the rate of tube degradation. The projected service life of the steam generators
is reassessed periodically in conjunction with inspections made during scheduled
outages of the Palo Verde units. APS' ongoing analyses indicate that it will be
economically desirable for APS to replace the Unit 2 steam generators, which
have been most affected by tube cracking, in five to ten years. APS expects that
the steam generator replacement can be accomplished within financial parameters
established before replacement was a consideration, and APS estimates that its
share of the replacement costs (in 1996 dollars and including installation and
replacement power costs) will be between $30 million and $50 million, most of
which will be incurred after the year 2000. APS expects that the replacement
would be performed in conjunction with a normal refueling outage in order to
limit incremental outage time to approximately 50 days. Based on the latest
available data, APS estimates that the Unit 1 and Unit 3 steam generators should
operate for the license periods (until 2025 and 2027, respectively), although
APS will continue its normal periodic assessment of these steam generators.
8
<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
Parent Company
- --------------
The parent company's cash requirements and its ability to fund those
requirements are discussed under "Capital Needs and Resources" in Management's
Discussion and Analysis of Financial Condition and Results of Operations in Part
II, Item 7 of the 1995 10-K.
During March 1996 the parent company's prepaid $30 million of its debt,
incurring a prepayment penalty of $3.6 million after income taxes, reducing the
aggregate principal amount to approximately $280 million. The parent company's
plans to prepay an additional $70 million of long-term debt, and perhaps do some
refinancing in 1996, resulting in additional prepayment penalties.
As a result of the 1996 regulatory agreement (see Note 5 of Notes to
Condensed Consolidated Financial Statements in Part I, Item 1 of this report),
The parent company will infuse $200 million into APS, in annual increments of
$50 million starting in 1996.
The Board declared a quarterly dividend of 25 cents per share of common
stock, payable June 1, 1996 to shareholders of record on May 1, 1996, totaling
approximately $21.9 million.
APS
- ---
For the three months ended March 31, 1996 APS incurred approximately
$58 million in capital expenditures, accounting for approximately 24% of the
most recently estimated 1996 capital expenditures. APS has estimated total
capital expenditures for the years 1996, 1997 and 1998 to be approximately $246
million, $242 million and $244 million, respectively. These amounts include
about $30 million each year for nuclear fuel expenditures.
Obligations for redemptions of 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
$123 million, $164 million and $114 million for the years 1996, 1997 and 1998,
respectively. During the three months
9
<PAGE>
ended March 31, 1996, APS redeemed approximately $51 million of its long-term
debt and approximately $23 million of its preferred stock, and incurred $25
million of long-term debt under a revolving credit agreement. It is APS' present
intention over the next several years to use excess cash flow to retire debt and
preferred stock.
Although provisions in APS' bond indenture, articles of incorporation
and financing orders from the ACC restrict the issuance of additional first
mortgage bonds and preferred stock, management does not expect any of these
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, 1996
and 1995:
Income (Loss)
(Unaudited)
(Thousands of Dollars)
Three Months Ended Twelve Months Ended
March 31, March 31,
1996 1995 1996 1995
-------- -------- --------- ---------
APS $ 41,129 $ 33,025 $ 228,540 $ 220,279
SunCor (1,210) 1,167 1,701 742
El Dorado (136) (857) 9,228 (4,438)
Pinnacle West(1) (8,521) (8,712) (44,793) (12,960)
-------- -------- --------- ---------
NET INCOME $ 31,262 $ 24,623 $ 194,676 $ 203,623
======== ======== ========= =========
(1) Includes Pinnacle West's interest expense, extraordinary charge for early
retirement of debt and operating expense net of income tax benefits. Income
tax benefits are as follows (in thousands): $5,098 and $3,994 for the three
months ended March 31, 1996 and 1995, respectively; and $22,211 and $51,565
for the twelve months ended March 31, 1996 and 1995, respectively.
10
<PAGE>
APS
- ---
Operating Results - Three-month period ended March 31, 1996 compared to
three-month period ended March 31, 1995
Earnings increased in the three-month period ended March 31, 1996
primarily due to customer growth, lower operations and maintenance expenses, and
lower interest expense. Operations and maintenance expenses decreased due to
fewer nuclear refueling outage days. Interest expense decreased due to lower
rates and lower average debt balances. Partially offsetting these positive
factors was a decrease in other income caused by the recognition of a gain on
the sale of a small subsidiary in 1995.
Operating Results - Twelve-month period ended March 31, 1996 compared to
twelve-month period ended March 31, 1995
Earnings increased in the twelve-month period ended March 31, 1996
primarily due to customer growth, accelerated investment tax credit
amortization, lower fuel costs, and lower operations and maintenance expenses.
The accelerated investment tax credit amortization was a result of the 1994 rate
settlement (see Note 5 of Notes to Condensed Consolidated Financial Statements
in Part I, Item 1 of this report) and is reflected as a decrease in income tax
expense. Fuel expense decreased due largely to lower fuel prices. Operations and
maintenance expenses decreased due to employee severance costs incurred in 1994,
lower fossil plant overhaul costs, and improved nuclear operations.
Partially offsetting these positive factors were milder weather, the
reversal in 1994 of certain previously recorded depreciation related to Palo
Verde, the absence of non-cash accretion income and revenue refund reversals
related to a 1991 rate settlement (see Note 1 of Notes to Consolidated Financial
Statements in Part II, Item 8 of the 1995 10-K), write-downs of an office
building and certain inventory, and a decrease in other income caused by the
recognition of a gain on the sale of a small subsidiary in the first quarter of
1995.
Non-utility Operations
- ----------------------
The parent company incurred extraordinary charges in the prepayment
of debt in the three-month and twelve-month periods. Interest expense decreased
in both periods due primarily to debt reduction. Additionally, the parent
company's income tax benefit decreased in the twelve-month period due to a 1994
non-recurring income tax benefit of approximately $26.8 million related to a
change in tax law.
SunCor's earnings decreased in the three-month period due to the
expiration of a lease agreement related to the Wigwam Resort in 1995. Earnings
increased in the twelve-month period as a result of increased earnings in joint
ventures.
11
<PAGE>
El Dorado's earnings increased in the three-month period due to a 1995 loss on a
sale of an investment. The twelve-month earnings increased due to sales of
investments and an investment writedown in 1994.
Other Income
- ------------
Other income reflects accounting practices required for regulated
public utilities and represents a composite of cash and non-cash items,
including AFUDC and accretion income on Palo Verde Unit 3, which APS completed
recording in May 1994. See Note 1 of Notes to Consolidated Financial Statements
in Part II, Item 8 of the 1995 10-K.
12
<PAGE>
PART II. OTHER INFORMATION
--------------------------
The following information relates primarily to Pinnacle West and its
principal subsidiary, APS.
ITEM 1. Legal Proceedings
------------------------------
Property Taxes
--------------
As previously reported, in November 1995, the Arizona Court of Appeals
held that an Arizona state property tax law, effective December 31, 1989, is
unconstitutional and a lawsuit filed by the Palo Verde participants, including
APS, was returned to the Arizona Tax Court for determination of the
appropriate remedy consistent with that decision. See "Property Taxes" in Part
I, Item 3 of the 1995 10-K. On April 23, 1996 the parties reached an agreement
to settle the pending litigation. Pursuant to the tentative settlement, APS
will relinquish its claims for relief with respect to prior years and the
defendants will not challenge the Court of Appeals' decision concerning
prospective relief (for tax years 1996 and thereafter). APS does not expect
this matter to have a material impact on its financial position or results of
operations.
ITEM 5. Other Information
- --------------------------
Palo Verde Nuclear Generating Station
-------------------------------------
See Note 7 of Notes to Condensed Consolidated Financial Statements in
Part I, Item 1 of this report for a discussion of issues regarding the Palo
Verde steam generators.
Environmental Matters
---------------------
The Comprehensive Environmental Response, Compensation, and Liability
Act ("Superfund") establishes liability for the cleanup of hazardous
substances found contaminating the soil, water, or air. Those who generated,
transported or disposed of hazardous substances at a contaminated site are
among those who are potentially responsible parties ("PRP's") and are each
strictly, and usually jointly and severally, liable for the cost of the
remediation of the substances. The EPA had previously advised APS that the EPA
considers APS to be a PRP in the Indian Bend Wash Superfund Site, South Area,
where APS's Ocotillo Power Plant is located. APS is in the process of
conducting a voluntary investigation to determine the extent and scope of
contamination at the Plant site. Based on the information to date, APS does
not expect this matter to have a material impact on its financial position or
results of operations.
13
<PAGE>
ITEM 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits
Exhibit No. Description
----------- -----------
27 Financial Data Schedule
In addition to the Exhibit shown above, the Company hereby
incorporates the following Exhibits pursuant to Exchange Act Rule 12b-32 by
reference to the filings set forth below:
Previously Filed File Date
Exhibit No. Description As Exhibit No. Effective
- ----------- ----------- ---------- --- ---------
10.1 ACC Order dated 10.1 to APS' 1-4473 5/14/96
April 24, 1996 March 1996
Form 10-Q report
(b) Reports on Form 8-K
During the quarter ended March 31, 1996, and the period ended May 15,
1996, the Company filed no reports on Form 8-K.
14
<PAGE>
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, 1996 By: /s/ Nancy Newquist
-------------------
Nancy Newquist
Vice President and Treasurer
(Principal Financial Officer and
Officer Duly Authorized to sign
this Report)
15
<TABLE> <S> <C>
<ARTICLE> UT
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 4,639,626
<OTHER-PROPERTY-AND-INVEST> 579,096
<TOTAL-CURRENT-ASSETS> 366,467
<TOTAL-DEFERRED-CHARGES> 1,356,532
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 6,941,721
<COMMON> 1,638,496
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 251,808
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,890,304
72,000
174,089
<LONG-TERM-DEBT-NET> 2,309,891
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 159,600
<LONG-TERM-DEBT-CURRENT-PORT> 167,242
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,168,595
<TOT-CAPITALIZATION-AND-LIAB> 6,941,721
<GROSS-OPERATING-REVENUE> 361,255
<INCOME-TAX-EXPENSE> 23,050
<OTHER-OPERATING-EXPENSES> 198,421
<TOTAL-OPERATING-EXPENSES> 254,693
<OPERATING-INCOME-LOSS> 106,562
<OTHER-INCOME-NET> (48,653)
<INCOME-BEFORE-INTEREST-EXPEN> 0
<TOTAL-INTEREST-EXPENSE> 47,518
<NET-INCOME> 31,262
0
<EARNINGS-AVAILABLE-FOR-COMM> 31,262
<COMMON-STOCK-DIVIDENDS> 21,857
<TOTAL-INTEREST-ON-BONDS> 42,730
<CASH-FLOW-OPERATIONS> 159,176
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0
</TABLE>
