Pinnacle West Capital Corp. (NYSE: PNW) today reported consolidated on-going earnings of $123.1 million, or $1.12 per diluted share of common stock, for the quarter ended June 30, 2012. This result compares with on-going earnings of $86.0 million or $0.78 per share, in the same 2011 period. The Company’s consolidated net income attributable to common shareholders for the 2012 second quarter was $122.3 million, or $1.11 per diluted share, compared with net income of $86.7 million, or $0.79 per share, for the same quarter a year ago.
On-going earnings exclude results of discontinued operations related to the Company’s former real estate activities and energy services business. A reconciliation of reported earnings to on-going earnings is provided at the end of this release.
“Temperatures well above normal during the quarter – combined with temperatures significantly below historical averages a year ago – positively impacted our second-quarter results,” said Pinnacle West Chairman, President and Chief Executive Officer Don Brandt. “The quarter-over-quarter swing in weather produced an 8.1 percent increase in retail electricity sales over the same period a year ago as people used their air-conditioners more to combat the early summer heat.
“Looking forward, we continue to create value by achieving operational excellence, investing in Arizona’s sustainable energy future, and remaining focused on disciplined cost-management. Sticking with this approach provides us the opportunity to maintain high levels of reliability and customer satisfaction, while achieving our financial goals for investors through the duration of the four-year base-rate stay-out period agreed to in our 2012 retail regulatory settlement.”The second-quarter on-going results comparison was positively impacted by the following factors:
- Hotter-than-normal weather improved the Company’s earnings by $0.23 per share compared to the 2011 second quarter, during which abnormally mild weather adversely affected earnings by $0.15 per share compared with historically normal conditions. In the 2012 second quarter, there were 568 residential cooling degree-days (a proxy for the effects of weather) – 14 percent more than normal and 51 percent more than the year-ago second quarter.
- Lower infrastructure-related costs increased earnings by $0.06 per share, related to lower depreciation and amortization, primarily attributable to the operating license extensions at the Palo Verde Nuclear Generating Station in 2011; and decreased interest expense due to lower debt balances and interest rates. These lower costs were partially offset by higher property taxes .
- Higher transmission revenues augmented results by $0.05 per share, primarily because of a retail transmission rate increase implemented in July 2011.
- Lower fuel costs and improved mark-to-market valuations of fuel contracts, net of regulatory deferrals, raised results by $0.04 per share.
- The net effect of other miscellaneous items increased earnings $0.02 per share.
- Increased operations and maintenance expenses, due largely to stock compensation costs resulting from an improved company stock price and estimated performance, decreased earnings by $0.05 per share. The variance excludes costs associated with renewable energy, demand side management and similar regulatory programs, which are offset by comparable amounts of operating revenues.
- Lower retail electricity sales – excluding the effects of weather variations – reduced results $0.01 per share. The sales decrease, which was substantially offset by modest customer growth of about 1 percent, was primarily related to the impacts of customer conservation and energy efficiency and distributed renewable generation initiatives.
- Actual weather for the first six months of the year and normal weather patterns for remainder of the year;
- Weather-normalized retail electricity sales volume slightly below the prior year, in part due to the effects of customer conservation and energy efficiency and distributed renewable generation initiatives;
- Retail customer growth of about 1 percent;
- Total electricity gross margin (operating revenues, net of fuel and purchased power expenses, excluding Renewable Energy Surcharge and similar rate adjustors) of about $2.13 billion to $2.18 billion;
- Operating expenses (operations and maintenance, excluding costs for Renewable Energy Standard and similar regulatory programs; depreciation and amortization; and taxes other than income taxes) of about $1.33 billion to $1.36 billion;
- Interest expense, net of allowances for borrowed and equity funds used for construction, of about $180 million to $190 million; and
- An effective tax rate of about 35 percent.
PINNACLE WEST CAPITAL CORPORATION
NON-GAAP FINANCIAL MEASURE RECONCILIATION
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS
(GAAP MEASURE) TO ON-GOING EARNINGS
(NON-GAAP FINANCIAL MEASURE)
Three Months EndedJune 30, 2012
Three Months EndedJune 30, 2011
|Net Income Attributable to Common Shareholders||$||122.3||$||1.11||$||86.7||$||0.79|
|Less: Income (loss) from discontinued operations||(0.8||)||(0.01||)||0.7||0.01|
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