Pinnacle West Capital Corp. (NYSE: PNW) today reported consolidated on-going earnings of $244.8 million, or $2.21 per diluted share of common stock, for the quarter ended September 30, 2012. This result compares with on-going earnings of $245.8 million, or $2.24 per share, in the same 2011 period. The Company’s consolidated net income attributable to common shareholders for the 2012 third quarter was $244.8 million, or $2.21 per diluted share, compared with net income of $255.4 million, or $2.32 per share, for the same quarter a year ago.
On-going earnings exclude results of discontinued operations substantially related to the Company’s former energy services business. A reconciliation of reported earnings to on-going earnings is provided at the end of this release.
“ Arizona Public Service’s most important accomplishment – especially during the hot Arizona summer months – is maintaining the high quality of service and reliability our customers expect of us,” said Pinnacle West Chairman, President and Chief Executive Officer Don Brandt. “During the quarter, our generation fleet performed well, our customers experienced fewer outages, and our employees provided high quality service. At the same time, disciplined cost management remained a central theme at our Company and is a key to future earnings improvement.”
Brandt added that the third-quarter results demonstrate the positive value of employees’ focus on operational excellence, as well as the broadly supported retail rate settlement implemented this summer. “The average residential customer benefitted from a decision that kept their overall rates flat in 2012, while still allowing the Company the opportunity to earn a reasonable return for investors,” he said.The third-quarter on-going results comparison was affected by the following negative factors:
- The effects of weather variations decreased the Company’s earnings by $0.17 per share following an abnormally hot summer in 2011. The average high temperature in the 2012 third quarter was slightly below normal at 103.2 degrees, while the average high temperature in the same 2011 period was 106.4 degrees. As a result, the return to more conventional weather patterns contributed to a 15 percent reduction in cooling degree-days (a proxy for the effects of weather) in the 2012 period versus a year ago.
- Increased operations and maintenance expenses impacted earnings by $0.10 per share compared with the prior-year period. The expense increase primarily consisted of an increase in employee benefit costs; beginning of amortization of pension and other post-retirement benefits in 2012 compared with deferral of such costs in 2011 pursuant to the Company’s retail regulatory settlements; and higher fossil generation costs as a result of more planned maintenance being completed in the current-year quarter than in the same quarter a year ago. The O&M variance excludes costs associated with renewable energy, demand side management and similar regulatory programs, which are largely offset by comparable amounts of operating revenues.
- The absence of certain items that reduced the Company’s effective income tax rate in 2011 reduced results by $0.09 per share.
- A decrease in retail electricity sales – excluding the effects of weather variations – reduced results $0.02 per share. The sales decrease was primarily related to the impacts of customer conservation and energy efficiency and distributed renewable generation initiatives. However, modest customer growth of about 1.2 percent quarter-over-quarter helped offset the lower sales.
- The Company’s 2012 regulatory settlement, which included a retail non-fuel base rate increase, improved earnings by $0.21 per share. However, overall rates for the average residential customer did not change because the non-fuel base rate increase was offset by other rate changes. The settlement became effective July 1, 2012.
- Higher transmission revenues improved earnings by $0.09 per share, primarily because of a retail transmission rate increase implemented in August 2012.
- Lower infrastructure-related costs increased earnings by $0.04 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 .
- The net effect of other miscellaneous factors positively impacted results by $0.01 per share.
- Weather assumptions have been updated to reflect actual weather through the 2012 third quarter and normal weather patterns for remainder of the year; and
- Anticipated operating expenses (operations and maintenance, excluding costs for Renewable Energy Standard and similar regulatory programs; depreciation and amortization; and taxes other than income taxes) have been reduced to a range of $1.32 billion to $1.35 billion, a decrease from the previous range of $1.33 billion to $1.36 billion.
|PINNACLE WEST CAPITAL CORPORATION NON-GAAP FINANCIAL MEASURE RECONCILIATION|
|NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS (GAAP MEASURE) TO ON-GOING EARNINGS (NON-GAAP FINANCIAL MEASURE)|
|Three Months EndedSept. 30, 2012||Three Months EndedSept. 30, 2011|
|Dollars inMillions||DilutedEPS||Dollars inMillions||DilutedEPS|
|Net Income Attributable to Common Shareholders||$||244.8||$||2.21||$||255.4||$||2.32|
|Less: Income from Discontinued Operations||---||---||(9.6||)||(0.08||)|
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