UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of report (Date of earliest event reported): July 31, 2014

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

This combined Form 8-K is separately filed or furnished by Pinnacle West Capital Corporation and Arizona Public Service Company.  Each registrant is filing or furnishing on its own behalf all of the information contained in this Form 8-K that relates to such registrant and, where required, its subsidiaries.  Except as stated in the preceding sentence, neither registrant is filing or furnishing any information that does not relate to such registrant, and therefore makes no representation as to any such information.

 

 

 

Item 2.02.  Results of Operations and Financial Condition.

Item 7.01.  Regulation FD Disclosure.

 

The following information is furnished pursuant to both Item 2.02 and 7.01.

 

On July 31, 2014, Pinnacle West Capital Corporation (the “Company” or “Pinnacle West”) issued a press release regarding its financial results for the fiscal quarter ended June 30, 2014 and its earnings outlook for 2014.  A copy of the press release is attached hereto as Exhibit 99.1.

 

The Company is providing a quarterly consolidated statistical summary and a copy of the slide presentation made in connection with the quarterly earnings conference call on July 31, 2014.  This information contains Company operating results for the fiscal quarter ended June 30, 2014  and is attached hereto as Exhibits 99.2 and 99.3.  The summary and slide presentation are concurrently being posted to the Company’s website at www.pinnaclewest.com, which also contains a glossary of relevant terms.

 

Item 9.01.                                        Financial Statements and Exhibits.

 

(d)                                 Exhibits.

 

Exhibit No.		Registrant(s)		Description
99.1		Pinnacle West APS		Earnings News Release issued on July 31, 2014.
99.2		Pinnacle West APS		Pinnacle West Capital Corporation quarterly consolidated statistical summary for the three-month and six-month periods ended June 30, 2014 and 2013.
99.3		Pinnacle West APS		Pinnacle West Capital Corporation 2nd Quarter 2014 Results slide presentation accompanying July 31, 2014 conference call.

 

2

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

	PINNACLE WEST CAPITAL CORPORATION
	(Registrant)
Dated: July 31, 2014	By:	/s/ James R. Hatfield
		James R. Hatfield
		Executive Vice President and
		Chief Financial Officer
	ARIZONA PUBLIC SERVICE COMPANY
	(Registrant)
Dated: July 31, 2014	By:	/s/ James R. Hatfield
		James R. Hatfield
		Executive Vice President and
		Chief Financial Officer

 

3

 

Exhibit Index

 

Exhibit No.		Registrant(s)		Description
99.1		Pinnacle West APS		Earnings News Release issued on July 31, 2014.
99.2		Pinnacle West APS		Pinnacle West Capital Corporation quarterly consolidated statistical summary for the three-month and six-month periods ended June 30, 2014 and 2013.
99.3		Pinnacle West APS		Pinnacle West Capital Corporation 2nd Quarter 2014 Results slide presentation accompanying July 31, 2014 conference call.

 

4

Exhibit 99.1

 

 

FOR IMMEDIATE RELEASE		July 31, 2014
Media Contact:	Alan Bunnell, (602) 250-3376
Analyst Contact:	Paul Mountain, (602) 250-4952
Website:	pinnaclewest.com

 

PINNACLE WEST REPORTS 2014 SECOND-QUARTER RESULTS

 

·                  Financial results continue to benefit from cost management and operational excellence

 

·                  Results in line with expectations; company affirms full-year 2014 earnings guidance

 

PHOENIX — Pinnacle West Capital Corp. (NYSE: PNW) today reported consolidated net income attributable to common shareholders of $132.5 million, or $1.19 per diluted share of common stock, for the quarter ended June 30, 2014. This result compares with earnings of $131.2 million or $1.18 per share, in the same 2013 period. For both the 2014 and 2013 second-quarter periods, net income is the same as on-going earnings.

 

“Results were in line with our expectations due in large part to our employees’ continued cost management and operational excellence. We are confident that our year-end results will be within our earnings guidance range,” said Pinnacle West Chairman, President and Chief Executive Officer Don Brandt. “Looking forward, we remain committed to working with regulators and other stakeholders on key issues important to Arizona’s energy future.”

 

The 2014 second-quarter results comparison was positively impacted by the following factors, adjusted for the deferral impacts of the Four Corners transaction:

 

·                  Lower operating expenses impacted earnings by $0.01 per share compared with the prior-year quarter. The decrease largely was the result of lower employee benefit costs, partially offset by higher depreciation and amortization resulting from increased plant in service, as well as increased property taxes.

 

The operating expense variance excludes costs associated with renewable energy, energy efficiency and similar regulatory programs, which are largely offset by comparable amounts of operating revenues.

 

·                  The Lost Fixed Cost Recovery (LFCR) mechanism contributed $0.02 per share.

 

·                  Decreased interest expense, net of AFUDC, contributed $0.02 per share.

 

·                  Lower income tax expense improved results by $0.02 per share, primarily driven by tax credits related to our renewable generation facilities and a slightly lower statutory tax rate.

 

·                  Other miscellaneous items contributed $0.03 per share to the bottom line.

 

1

 

These positive factors were largely offset by:

 

·                  Lower retail electricity sales — excluding the effects of weather variations — reduced earnings by $0.04 per share compared to the prior year. Total weather-normalized retail electricity sales were 2 percent lower in the 2014 second quarter compared to the prior year. The drop in consumption reflects the effects of customer conservation, energy efficiency programs and distributed renewable generation. APS’s customer base, however, grew a steady 1.4 percent over the same timeframe, reflecting a continuing improvement in Arizona’s economic conditions.

 

·                  The effects of weather variations impacted results by $0.03 per share. Despite warmer-than-normal weather patterns in the 2014 second quarter, last year’s quarter was slightly warmer than this year. The average high temperature in the 2014 second quarter was 96.4 degrees, while the average high temperature in the same period a year ago was 97.6 degrees. As a result, residential cooling degree-days (a measure of the effects of weather) were 9 percent lower than last year’s second quarter, but still 10 percent above normal. Weather positively impacted 2013 second-quarter earnings by $0.09 per share compared with historically normal conditions.

 

·                  Lower transmission revenue reduced earnings by $0.02 per share largely due to timing of the annual FERC formula rate true-up which occurred in May.

 

Arizona Public Service Co. (APS), the Company’s principal subsidiary, reported 2014 second-quarter net income attributable to common shareholder of $134.9 million versus earnings of $133.9 million in the similar 2013 period.

 

Financial Outlook

 

For 2014, the Company continues to expect its on-going consolidated earnings will be in the range of $3.60 to $3.75 per diluted share. Longer-term, the Company’s goal is to achieve a consolidated earned return on average common equity of at least 9.5 percent annually through 2015.

 

Key factors and assumptions underlying the 2014 outlook can be found in the second-quarter 2014 earnings presentation slides on the Company’s website at pinnaclewest.com/investors.

 

Conference Call and Webcast

 

Pinnacle West invites interested parties to listen to the live webcast of management’s conference call to discuss the Company’s 2014 second-quarter results, as well as recent developments, at 12 noon (ET) today, July 31. The webcast can be accessed at pinnaclewest.com/presentations and will be available for replay on the website for 30 days. To access the live conference call by telephone, dial (877) 407-8035 or (201) 689-8035 for international callers. A replay of the call also will be available until 11:59 p.m. (ET), Thursday, August 7, 2014, by calling (877) 660-6853 in the U.S. and Canada or (201) 612-7415 internationally and entering conference ID number 13584503.

 

2

 

General Information

 

Pinnacle West Capital Corp., an energy holding company based in Phoenix, has consolidated assets of about $13.7 billion, nearly 6,400 megawatts of generating capacity and about 6,400 employees in Arizona and New Mexico. Through its principal subsidiary, Arizona Public Service, the Company provides retail electricity service to nearly 1.2 million Arizona homes and businesses. For more information about Pinnacle West, visit the Company’s website at pinnaclewest.com.

 

Dollar amounts in this news release are after income taxes.  Earnings per share amounts are based on average diluted common shares outstanding.  For more information on Pinnacle West’s operating statistics and earnings, please visit pinnaclewest.com/investors.

 

PINNACLE WEST CAPITAL CORPORATION

NON-GAAP FINANCIAL MEASURE RECONCILIATION

DEFERRAL IMPACTS OF THE FOUR CORNERS TRANSACTION

 

		Three Months Ended
		June 30,
					Four Corners								EPS
$ millions pretax, except per share amounts		2014			Deferral		2014 Adjusted			2013			Impact
Operations and maintenance		$	211		(2	)	$	209		$	229
Renewable energy (excluding AZ Sun), demand side management and similar regulatory programs		22			—		22			36
Net O&M		189			(2	)	187			193			$	0.03
Depreciation and amortization		105			3		108			106			$	(0.01	)
Taxes other than income taxes		44			(1	)	43			41			$	(0.01	)
Allowance for equity funds used during construction		(8		)	—		(8		)	(6		)
Interest charges		52			(2	)	50			51
Allowance for borrowed funds used during construction		(4		)	—		(4		)	(4		)
Interest expense, net of AFUDC		40			(2	)	38			41			$	0.02
Other expenses (Operating)		1			—		1			2
Other income		(3		)	2		(1		)	—
Other expense		1			—		1			2
Other		(1		)	2		1			4			$	0.02

 

3

 

NON-GAAP FINANCIAL INFORMATION

 

In this press release, we refer to “on-going earnings.” On-going earnings is a “non-GAAP financial measure,” as defined in accordance with SEC rules. We believe on-going earnings provide investors with a useful indicator of our results that is comparable among periods because it excludes the effects of unusual items that may occur on an irregular basis. Investors should note that these non-GAAP financial measures involve judgments by management, including whether an item is classified as an unusual item. We use on-going earnings, or similar concepts, to measure our performance internally in reports for management.

 

FORWARD-LOOKING STATEMENTS

 

This press release contains forward-looking statements based on our current expectations, including statements regarding our earnings guidance and financial outlook and goals. These forward-looking statements are often identified by words such as “estimate,” “predict,” “may,” “believe,” “plan,” “expect,” “require,” “intend,” “assume” and similar words. Because actual results may differ materially from expectations, we caution readers not to place undue reliance on these statements. A number of factors could cause future results to differ materially from historical results, or from outcomes currently expected or sought by Pinnacle West or APS. These factors include, but are not limited to:

 

·                  our ability to manage capital expenditures and operations and maintenance costs while maintaining reliability and customer service levels;

·                  variations in demand for electricity, including those due to weather, the general economy, customer and sales growth (or decline), and the effects of energy conservation measures and distributed generation;

·                  power plant and transmission system performance and outages;

·                  competition in retail and wholesale power markets;

·                  regulatory and judicial decisions, developments and proceedings;

·                  new legislation or regulation including those relating to environmental requirements, nuclear plant operations and potential deregulation of retail electric markets;

·                  fuel and water supply availability;

·                  our ability to achieve timely and adequate rate recovery of our costs, including returns on debt and equity capital;

·                  our ability to meet renewable energy and energy efficiency mandates and recover related costs;

·                  risks inherent in the operation of nuclear facilities, including spent fuel disposal uncertainty;

·                  current and future economic conditions in Arizona, particularly in real estate markets;

·                  the cost of debt and equity capital and the ability to access capital markets when required;

·                  environmental and other concerns surrounding coal-fired generation;

·                  volatile fuel and purchased power costs;

·                  the investment performance of the assets of our nuclear decommissioning trust, pension, and other postretirement benefit plans and the resulting impact on future funding requirements;

·                  the liquidity of wholesale power markets and the use of derivative contracts in our business;

·                  potential shortfalls in insurance coverage;

·                  new accounting requirements or new interpretations of existing requirements;

·                  generation, transmission and distribution facility and system conditions and operating costs;

·                  the ability to meet the anticipated future need for additional baseload generation and associated transmission facilities in our region;

·                  the willingness or ability of our counterparties, power plant participants and power plant land owners to meet contractual or other obligations or extend the rights for continued power plant operations;

·                  technological developments affecting the electric industry; and

·                  restrictions on dividends or other provisions in our credit agreements and ACC orders.

 

4

 

These and other factors are discussed in Risk Factors described in Part 1, Item 1A of the Pinnacle West/APS Annual Report on Form 10-K for the fiscal year ended December 31, 2013, and in Part II, Item 1A of the Pinnacle West/APS Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, which readers should review carefully before placing any reliance on our financial statements or disclosures. Neither Pinnacle West nor APS assumes any obligation to update these statements, even if our internal estimates change, except as required by law.

 

#  #  #

 

5

 

PINNACLE WEST CAPITAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

(dollars and shares in thousands, except per share amounts)

 

		THREE MONTHS ENDED						SIX MONTHS ENDED
		JUNE 30,						JUNE 30,
		2014			2013			2014			2013
Operating Revenues		$	906,264		$	915,822		$	1,592,515		$	1,602,474
Operating Expenses
Fuel and purchased power		290,854			277,584			540,640			508,263
Operations and maintenance		211,222			229,300			424,104			452,550
Depreciation and amortization		105,150			106,292			206,922			210,022
Taxes other than income taxes		44,004			40,814			89,849			80,835
Other expenses		921			2,020			1,717			4,069
Total		652,151			656,010			1,263,232			1,255,739
Operating Income		254,113			259,812			329,283			346,735
Other Income (Deductions)
Allowance for equity funds used during construction		7,499			6,265			14,941			13,129
Other income		2,781			469			5,148			1,227
Other expense		(508		)	(2,234		)	(5,192		)	(5,986		)
Total		9,772			4,500			14,897			8,370
Interest Expense
Interest charges		51,751			51,307			104,720			100,785
Allowance for borrowed funds used during construction		(3,790		)	(3,636		)	(7,560		)	(7,626		)
Total		47,961			47,671			97,160			93,159
Income Before Income Taxes		215,924			216,641			247,020			261,946
Income Taxes		74,540			77,043			80,945			89,512
Net Income		141,384			139,598			166,075			172,434
Less: Net income attributable to noncontrolling interests		8,926			8,391			17,851			16,783
Net Income Attributable To Common Shareholders		$	132,458		$	131,207		$	148,224		$	155,651
Weighted-Average Common Shares Outstanding - Basic		110,565			109,962			110,546			109,898
Weighted-Average Common Shares Outstanding - Diluted		111,002			110,932			110,925			110,843
Earnings Per Weighted-Average Common Share Outstanding
Net income attributable to common shareholders - basic		$	1.20		$	1.19		$	1.34		$	1.42
Net income attributable to common shareholders - diluted		$	1.19		$	1.18		$	1.34		$	1.40

 

Exhibit 99.2

 

Last Updated

7/31/2014

 

Pinnacle West Capital Corporation

 

Quarterly Consolidated Statistical Summary

Periods Ended June 30, 2014 and 2013

 

 

			3 Months Ended June 30,												6 Months Ended June 30,
Line			2014				2013				Incr (Decr)				2014				2013				Incr (Decr)
	EARNINGS CONTRIBUTION BY SUBSIDIARY (Dollars in Millions)
1	Arizona Public Service		$	144			$	142			$	2			$	172			$	177			$	(5)
2	El Dorado		-				-				-				-				(1		)		1
3	Parent Company		(3		)		(3		)		-				(6		)		(4		)		(2)
4	Net Income		141				139				2				166				172				(6)
5	Less: Net Income Attributable to Noncontrolling Interests		9				8				1				18				16				2
6	Net Income Attributable to Common Shareholders		$	132			$	131			$	1			$	148			$	156			$	(8)
	EARNINGS PER SHARE BY SUBSIDIARY - DILUTED
7	Arizona Public Service		$	1.30			$	1.28			$	0.02			$	1.55			$	1.59			$	(0.04)
8	El Dorado		-				-				-				-				(0.01		)		0.01
9	Parent Company		(0.03		)		(0.02		)		(0.01		)		(0.05		)		(0.03		)		(0.02)
10	Net Income		1.27				1.26				0.01				1.50				1.55				(0.05)
11	Less: Net Income Attributable to Noncontrolling Interests		0.08				0.08				0.00				0.16				0.15				0.01
12	Net Income Attributable to Common Shareholders		$	1.19			$	1.18			$	0.01			$	1.34			$	1.40			$	(0.06)
13	BOOK VALUE PER SHARE		$	38.35			$	36.66			$	1.69			$	38.35			$	36.66			$	1.69
	COMMON SHARES OUTSTANDING (Thousands)
14	Average - Diluted		111,002				110,932				70				110,925				110,843				82
15	End of Period		110,407				109,993				414				110,407				109,993				414

 

See Glossary of Terms

Page 1 of 4

 

 

Last Updated

7/31/2014

 

Pinnacle West Capital Corporation

 

Quarterly Consolidated Statistical Summary

Periods Ended June 30, 2014 and 2013

 

 

			3 Months Ended June 30,												6 Months Ended June 30,
Line			2014				2013				Incr (Decr)				2014				2013				Incr (Decr)
	ELECTRIC OPERATING REVENUES (Dollars in Millions)
	Retail
16	Residential		$	428			$	444			$	(16	)		$	710			$	752			$	(42	)
17	Business		416				420				(4		)		745				749				(4		)
18	Total retail		844				864				(20		)		1,455				1,501				(46		)
	Wholesale revenue on delivered electricity
19	Traditional contracts		15				15				-				26				26				-
20	Off-system sales		30				17				13				78				39				39
21	Native load hedge liquidation		-				3				(3		)		-				4				(4		)
22	Total wholesale		45				35				10				104				69				35
23	Transmission for others		8				8				-				16				15				1
24	Other miscellaneous services		9				8				1				16				16				-
25	Total electric operating revenues		$	906			$	915			$	(9	)		$	1,591			$	1,601			$	(10	)
	ELECTRIC SALES (GWH)
	Retail sales
26	Residential		3,204				3,344				(140		)		5,586				6,074				(488		)
27	Business		3,797				3,877				(80		)		7,027				7,148				(121		)
28	Total retail		7,001				7,221				(220		)		12,613				13,222				(609		)
	Wholesale electricity delivered
29	Traditional contracts		230				213				17				374				343				31
30	Off-system sales		789				537				252				1,892				1,354				538
31	Retail load hedge management		0				84				(84		)		0				115				(115		)
32	Total wholesale		1,019				834				185				2,266				1,812				454
33	Total electric sales		8,020				8,055				(35		)		14,879				15,034				(155		)

 

See Glossary of Terms

Page 2 of 4

 

 

Last Updated

7/31/2014

 

Pinnacle West Capital Corporation

 

Quarterly Consolidated Statistical Summary

Periods Ended June 30, 2014 and 2013

 

 

			3 Months Ended June 30,									6 Months Ended June 30,
Line			2014			2013			Incr (Decr)			2014			2013			Incr (Decr)
	AVERAGE ELECTRIC CUSTOMERS
	Retail customers
34	Residential		1,029,918			1,015,649			14,269			1,032,966			1,018,733			14,233
35	Business		129,197			127,993			1,204			129,015			127,944			1,071
36	Total retail		1,159,115			1,143,642			15,473			1,161,981			1,146,677			15,304
37	Wholesale customers		55			51			4			56			52			4
38	Total customers		1,159,170			1,143,693			15,477			1,162,037			1,146,729			15,308
39	Total customer growth (% over prior year)		1.4%			1.3%			0.1%			1.3%			1.4%			(0.1)%
	RETAIL SALES (GWH) - WEATHER NORMALIZED
40	Residential		3,167			3,234			(67)			5,776			5,800			(24)
41	Business		3,759			3,830			(71)			6,979			7,058			(79)
42	Total		6,926			7,064			(138)			12,755			12,858			(103)
43	Retail sales (GWH) (% over prior year)		(2.0)%			1.1%			(3.1)%			(0.8)%			0.8%			(1.6)%
	RETAIL USAGE (KWh/Average Customer)
44	Residential		3,111			3,292			(181)			5,408			5,962			(554)
45	Business		29,393			30,287			(894)			54,462			55,866			(1,404)
	RETAIL USAGE - WEATHER NORMALIZED (KWh/Average Customer)
46	Residential		3,075			3,184			(109)			5,592			5,693			(101)
47	Business		29,098			29,927			(829)			54,090			55,165			(1,075)
	ELECTRICITY DEMAND (MW)
48	Native load peak demand		6,316			6,883			(567)			6,316			6,883			(567)
	WEATHER INDICATORS - RESIDENTIAL
	Actual
49	Cooling degree-days		530			580			(50)			530			580			(50)
50	Heating degree-days		6			1			5			245			614			(369)
51	Average humidity		13%			14%			(1)%			13%			14%			(1)%
	10-Year Averages
52	Cooling degree-days		483			483			-			483			483			-
53	Heating degree-days		10			10			-			499			499			-
54	Average humidity		15%			15%			-			15%			15%			-

 

See Glossary of Terms.

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