FORM 10-Q

Securities and Exchange Commission

Washington, D.C. 20549

 

ý                                 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended     June 30, 2003   

 

OR

 

o                                 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)

 

 

 

(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 ý  No o

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

 

Yes ý  No o

 

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 August 12, 2003: 91,271,421

 

Glossary

 

ACC — Arizona Corporation Commission

 

ACC Staff — Staff of the Arizona Corporation Commission

 

ALJ — Administrative Law Judge

 

APS — Arizona Public Service Company, a subsidiary of the Company

 

APS Energy Services — APS Energy Services Company, Inc., a subsidiary of the Company

 

CAISO — California Independent System Operator

 

CC&N — Certificate of Convenience and Necessity

 

Citizens — Citizens Communications Company

 

Company — Pinnacle West Capital Corporation

 

CPUC — California Public Utility Commission

 

EITF — the FASB’s Emerging Issues Task Force

 

El Dorado — El Dorado Investment Company, a subsidiary of the Company

 

ERMC —Energy Risk Management Committee

 

FASB — Financial Accounting Standards Board

 

FERC — United States Federal Energy Regulatory Commission

 

FIN — FASB Interpretation

 

Financing Order — ACC order issued on April 4, 2003 relating to APS’ request to provide financing or credit support to Pinnacle West Energy or the Company

 

GAAP — accounting principles generally accepted in the United States of America

 

Interim Financing  Order — ACC order issued on November 22, 2002 relating to APS’ request to provide financing or credit support to the Company

 

IRS — United States Internal Revenue Service

 

March 2003 10-Q — Pinnacle West Capital Corporation Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2003

 

Moody’s — Moody’s Investors Service

 

MW — megawatt, one million watts

 

MWh — megawatt-hours, one million watts per hour

 

NAC — NAC International Inc., a subsidiary of El Dorado

 

Native Load — retail and wholesale sales supplied under traditional cost-based rate regulation

 

1999 Settlement Agreement — comprehensive settlement agreement related to the implementation of retail electric competition

 

NRC — United States Nuclear Regulatory Commission

 

OCI — other comprehensive income

 

Palo Verde — Palo Verde Nuclear Generating Station

 

PG&E — PG&E Corp.

 

Pinnacle West — Pinnacle West Capital Corporation, the Company

 

Pinnacle West Energy — Pinnacle West Energy Corporation, a subsidiary of the Company

 

 

PWEC Dedicated Assets — the following Pinnacle West Energy power plants, each of which is dedicated to APS’ customers: Redhawk Units 1 and 2, West Phoenix Units 4 and 5 and Saguaro Unit 3

 

PX — California Power Exchange

 

Rules — ACC retail electric competition rules

 

SCE — Southern California Edison Company

 

SEC — United States Securities and Exchange Commission

 

SFAS — Statement of Financial Accounting Standards

 

SNWA — Southern Nevada Water Authority

 

SPE — special-purpose entity

 

Standard & Poor’s — Standard & Poor’s Corporation

 

SunCor — SunCor Development Company, a subsidiary of the Company

 

System — non-trading energy related activities

 

T&D — transmission and distribution

 

Track A Order — ACC order dated September 10, 2002 regarding generation asset transfers and related issues

 

Track B Order —ACC order dated March 14, 2003 regarding competitive solicitation requirements for power purchases by Arizona’s investor-owned electric utilities

 

Trading — energy-related activities entered into with the objective of generating profits on changes in market prices

 

2002 10-K — the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002

 

UniSource — UniSource Energy Corporation

 

VIE — variable interest entity

 

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. Financial Statements.

 

PINNACLE WEST CAPITAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

(in thousands, except per share amounts)

 

		Three Months Ended June 30,
		2003			2002
Operating Revenues
Regulated electricity segment		$	506,632		$	496,838
Marketing and trading segment		167,475			49,503
Real estate segment		57,189			44,294
Other revenues		26,187			2,881
Total		757,483			593,516
Operating Expenses
Regulated electricity segment purchased power and fuel		124,108			104,591
Marketing and trading segment purchased power and fuel		147,698			30,479
Operations and maintenance		141,519			128,996
Real estate operations segment		53,942			42,532
Depreciation and amortization		107,076			101,786
Taxes other than income taxes		28,149			27,632
Other expenses		22,509			1,668
Total		625,001			437,684
Operating Income		132,482			155,832
Other
Other income (Note 16)		2,698			3,987
Other expense (Note 16)		(5,157		)	(13,020		)
Total		(2,459		)	(9,033		)
Interest Expense
Interest charges		51,117			46,764
Capitalized interest		(11,231		)	(13,908		)
Total		39,886			32,856
Income From Continuing Operations Before Income Taxes		90,137			113,943
Income Taxes		35,248			45,140
Income From Continuing Operations		54,889			68,803
Income From Discontinued Operations — Net of Income Tax Expense of $817 and $4,304		1,253			6,562
Net Income		$	56,142		$	75,365
Weighted-Average Common Shares Outstanding — Basic		91,258			84,794
Weighted-Average Common Shares Outstanding — Diluted		91,450			84,926
Earnings Per Weighted-Average Common Share Outstanding (Note 18)
Income From Continuing Operations — Basic		$	0.60		$	0.81
Net Income — Basic		0.62			0.89
Income From Continuing Operations — Diluted		0.60			0.81
Net Income — Diluted		0.61			0.89
Dividends Declared Per Share		$	0.425		$	0.40

 

See Notes to Condensed Consolidated Financial Statements.

 

3

 

PINNACLE WEST CAPITAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

(in thousands, except per share amounts)

 

		Six Months Ended June 30,
		2003			2002
Operating Revenues
Regulated electricity segment		$	891,592		$	877,079
Marketing and trading segment		330,218			125,318
Real estate segment		97,877			83,805
Other revenues		41,758			7,158
Total		1,361,445			1,093,360
Operating Expenses
Regulated electricity segment purchased power and fuel		198,779			166,122
Marketing and trading segment purchased power and fuel		291,343			66,264
Operations and maintenance		274,636			246,426
Real estate operations segment		94,101			79,178
Depreciation and amortization		212,474			201,442
Taxes other than income taxes		56,645			54,390
Other expenses		31,730			4,970
Total		1,159,708			818,792
Operating Income