-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UgP1PtinjjGWKaJCTWlM81D9z9BxAXbeVxQoWJZvM/igAje+kjXFI3zTarmDnPOd uDOlFt+XNoJDvfgc+PEYWQ== 0000950147-96-000188.txt : 19960517 0000950147-96-000188.hdr.sgml : 19960517 ACCESSION NUMBER: 0000950147-96-000188 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PINNACLE WEST CAPITAL CORP CENTRAL INDEX KEY: 0000764622 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 860512431 STATE OF INCORPORATION: AZ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08962 FILM NUMBER: 96566680 BUSINESS ADDRESS: STREET 1: 400 E VAN BUREN ST P.O. BOX 52132 CITY: PHOENIX STATE: AZ ZIP: 85072-2132 BUSINESS PHONE: 6023792616 MAIL ADDRESS: STREET 1: 400 E VAN BUREN ST STREET 2: P.O. BOX 52132 CITY: PHOENIX STATE: AZ ZIP: 85072-2132 FORMER COMPANY: FORMER CONFORMED NAME: AZP GROUP INC DATE OF NAME CHANGE: 19870506 10-Q 1 FORM 10-Q 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 - 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 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)
Three Months Ended March 31, 1996 1995 ---------- ---------- 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 ========== ==========
See Notes to Condensed Consolidated Financial Statements. 1 PINNACLE WEST CAPITAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME ------------------------------------------- (Unaudited) (Dollars in thousands, except per share amounts)
Twelve Months Ended March 31, 1996 1995 ----------- ----------- 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 =========== ===========
See Notes to Condensed Consolidated Financial Statements. 2 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 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 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 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 * 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 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 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 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 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 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 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 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 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 EX-27 2 FINANCIAL DATA SCHEDULE
UT 1,000 U.S. DOLLARS 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 1 PER-BOOK 4,639,626 579,096 366,467 1,356,532 0 6,941,721 1,638,496 0 251,808 1,890,304 72,000 174,089 2,309,891 0 0 159,600 167,242 0 0 0 2,168,595 6,941,721 361,255 23,050 198,421 254,693 106,562 (48,653) 0 47,518 31,262 0 31,262 21,857 42,730 159,176 0.36 0
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