SUPPLEMENTAL CASH FLOW INFORMATION

A reconciliation of Net Income to Net Cash Flows from Operating Activities follows:



	UNS Energy
	Six Months Ended June 30,
	2014			2013
	Thousands of Dollars
Net Income	$	57,829		$	45,963
Adjustments to Reconcile Net Income
To Net Cash Flows from Operating Activities
Depreciation Expense	78,644			72,970
Amortization Expense	12,631			16,408
Depreciation and Amortization Recorded to Fuel and O&M Expense	3,977			3,516
Amortization of Deferred Debt-Related Costs included in Interest Expense	1,584			1,515
Provision for Retail Customer Bad Debts	1,194			936
Use of Renewable Energy Credits for Compliance	11,313			8,106
Deferred Income Taxes	36,320			36,644
Investment Tax Credit Basis Adjustment - Creation of Regulatory Asset	—			(11,039		)
Pension and Retiree Expense	7,884			11,391
Pension and Retiree Funding	(5,974		)	(8,924		)
Share-Based Compensation Expense	1,859			1,390
Allowance for Equity Funds Used During Construction	(4,038		)	(2,463		)
LFCR Revenue	(7,654		)	—
Decrease to Reflect PPFAC/PGA Recovery	(21,437		)	(3,294		)
PPFAC Reduction - 2013 TEP Rate Order	—			3,000
Changes in Assets and Liabilities which Provided (Used)
Cash Exclusive of Changes Shown Separately
Accounts Receivable	(22,766		)	(20,706		)
Materials and Fuel Inventory	(4,413		)	8,777
Accounts Payable	(5,875		)	(9,576		)
Income Taxes	(88		)	(15,980		)
Interest Accrued	1,305			(6,885		)
Taxes Other Than Income Taxes	3,721			490
Other	(8,259		)	15,413
Net Cash Flows – Operating Activities	$	137,757		$	147,652



	TEP
	Six Months Ended June 30,
	2014			2013
	Thousands of Dollars
Net Income	$	47,897		$	32,266
Adjustments to Reconcile Net Income
To Net Cash Flows from Operating Activities
Depreciation Expense	61,891			57,418
Amortization Expense	14,476			18,275
Depreciation and Amortization Recorded to Fuel and O&M Expense	3,406			2,987
Amortization of Deferred Debt-Related Costs Included in Interest Expense	1,285			1,216
Provision for Retail Customer Bad Debts	833			711
Use of Renewable Energy Credits for Compliance	9,884			7,414
Deferred Income Taxes	29,641			24,883
Investment Tax Credit Basis Adjustment - Creation of Regulatory Asset	—			(10,751		)
Pension and Retiree Expense	6,824			9,939
Pension and Retiree Funding	(5,522		)	(8,493		)
Share-Based Compensation Expense	1,496			1,108
Allowance for Equity Funds Used During Construction	(3,524		)	(1,763		)
LFCR Revenue	(6,121		)	—
Increase (Decrease) to Reflect PPFAC Recovery	(14,791		)	2,914
PPFAC Reduction - 2013 TEP Rate Order	—			3,000
Changes in Assets and Liabilities which Provided (Used)
Cash Exclusive of Changes Shown Separately
Accounts Receivable	(35,498		)	(30,452		)
Materials and Fuel Inventory	(3,936		)	8,923
Accounts Payable	6,019			(11		)
Income Taxes	(6		)	(10,798		)
Interest Accrued	1,320			(6,886		)
Taxes Other Than Income Taxes	5,247			2,295
Other	(7,779		)	11,347
Net Cash Flows – Operating Activities	$	113,042		$	115,542

NON-CASH TRANSACTIONS

In April 2014, TEP recorded an increase of $109 million to both Utility Plant Under Capital Leases and Current Obligations Under Capital Leases due to TEP's commitment to purchase lease interests in April 2015. See Note 5.

In March 2013, TEP issued $91 million of tax-exempt bonds and used the proceeds to redeem debt using a trustee. Since the cash flowed through a trust account, the issuance and redemption of debt resulted in a non-cash transaction.