Pinnacle West Reports Third Quarter Earnings; Results Reflect Company's Investments to Meet Retail Growth

Oct 22 - Business Wire

Pinnacle West Capital Corp. (NYSE: PNW) today reported consolidated net income for the quarter ended September 30, 2004, of $105.4 million, or $1.15 per diluted share of common stock. This result compares with consolidated net income of $110.0 million, or $1.20 per diluted share, for the same period in 2003.

"Our results reflect milder weather and rising costs necessary to meet Arizona's growing energy needs," said Chairman Bill Post, citing customer growth that is three times the national average. "With an eye to the future, we remain focused on achieving regulatory treatment that covers the costs of providing reliable service for our retail customers."

The decrease in quarter-to-quarter earnings was primarily the result of hotter-than-normal weather in the 2003 summer period; a net increase in costs related to new electricity generating units placed into service in mid-2003 and mid-2004; an increase in customer service and other operating costs; and higher fuel and purchased power prices.

These factors were partially offset by lower replacement power costs due to fewer unplanned power plant outages; improved wholesale power marketing results; the absence of regulatory asset amortization; and higher retail sales volumes due to customer growth of 3.9 percent during the 2004 third quarter.

For the nine-month period ended September 30, 2004, Pinnacle West's consolidated net income was $209.5 million, or $2.29 per diluted share of common stock. This result compares with consolidated net income of $191.5 million, or $2.09 per diluted share, in last year's corresponding period.

For more information on Pinnacle West's operating statistics and earnings, please visit http://www.pinnaclewest.com/main/pnw/investors/default.html .

Pinnacle West is a Phoenix-based company with consolidated assets of approximately $9.9 billion. Through its subsidiaries, the Company generates, sells and delivers electricity and sells energy-related products and services to retail and wholesale customers in the western United States. It also develops residential, commercial, and industrial real estate projects.

Webcast and Conference Call

The Company will hold a conference call and live webcast at 12 noon (ET) today, Friday, October 22 to discuss its earnings. The webcast can be accessed at www.pinnaclewest.com/main/pnw/investors/presentations/default.html  and will be available for replay on the web site for 30 days. To access the live conference call by telephone, dial (877) 356-3961 and enter reservation number 9289484. A replay of the call also will be available until 11:55 p.m. (ET), Friday, October 29, 2004, by calling (800) 642-1687 in the U.S. and Canada or (706) 645-9291 internationally and entering the same reservation number.

This press release may contain forward-looking statements within the meaning of the safe harbor of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of our management, based on information currently available to our management. When we use words such as "believes," "expects," "anticipates," "intends," "plans," "estimates," "predicts," "should," or similar expressions, we are making forward-looking statements. Forward-looking statements are not guarantees of performance. They involve risks, (including those described in the "Risk Factors" in Exhibit 99.1 to our most recent Report on Form 10-Q filed with the SEC), uncertainties, and assumptions. Our future results may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results are beyond our ability to control or predict. Except to the extent required by applicable laws, we undertake no obligation to publicly update any forwarding-looking statement, whether as a result of new information, future events or otherwise. These factors include, but are not limited to: state and federal regulatory and legislative decisions and actions, including the outcome of the rate case APS filed with the ACC on June 27, 2003 and the wholesale electric price mitigation plan adopted by the FERC; the ongoing restructuring of the electric industry, including the introduction of retail electric competition in Arizona and decisions impacting wholesale competition; the outcome of regulatory, legislative and judicial proceedings relating to the restructuring; market prices for electricity and natural gas; power plant performance and outages, including transmission outages and constraints; weather variations affecting local and regional customer energy usage; customer growth and energy usage; regional economic and market conditions, including the results of litigation and other proceedings resulting from the California energy situation, volatile purchased power and fuel costs and the completion of generation and transmission construction in the region, which could affect customer growth and the cost of power supplies; the cost of debt and equity capital and access to capital markets; the uncertainty that current credit ratings will remain in effect for any given period of time; our ability to compete successfully outside traditional regulated markets (including the wholesale market); the performance of our marketing and trading activities due to volatile market liquidity and any deteriorating counterparty credit and the use of derivative contracts in our business (including the interpretation of the subjective and complex accounting rules related to these contracts); changes in accounting principles generally accepted in the United States of America and the interpretation of those principles; the performance of the stock market and the changing interest rate environment, which affect the amount of our required contributions to our pension plan and nuclear decommissioning trust funds, as well as our reported costs of providing pension and other postretirement benefits; technological developments in the electric industry; strength of the real estate market in SunCor's market areas, which include Arizona, Idaho, New Mexico and Utah; conservation programs; and other uncertainties, all of which are difficult to predict and many of which are beyond our control. -0- *T PINNACLE WEST CAPITAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) (in thousands, except per share amounts) THREE MONTHS ENDED NINE MONTHS ENDED September 30, September 30, 2004 2003 2004 2003 ------------------- ----------------------- Operating Revenues Regulated electricity segment $670,559 $667,400 $1,605,952 $1,545,829 Marketing and trading segment 128,563 82,558 332,186 300,439 Real estate segment 75,072 75,009 193,965 172,886 Other revenues 12,585 6,035 32,904 16,774 --------- --------- ----------- ----------- Total 886,779 831,002 2,165,007 2,035,928 --------- --------- ----------- ----------- Operating Expenses Regulated electricity segment purchased power and fuel 202,156 208,757 442,409 394,373 Marketing and trading segment purchased power and fuel 107,377 84,195 269,261 263,201 Operations and maintenance 160,765 133,852 437,126 408,488 Real estate segment operations 67,079 63,196 177,374 157,297 Depreciation and amortization 97,349 110,242 302,919 321,197 Taxes other than income taxes 31,649 28,206 94,511 84,851 Other expenses 9,568 5,193 25,893 12,445 --------- --------- ----------- ----------- 675,943 633,641 1,749,493 1,641,852 --------- --------- ----------- ----------- Operating Income 210,836 197,361 415,514 394,076 --------- --------- ----------- ----------- Other Allowance for equity funds used during construction (1,327) 11,194 2,859 11,194 Other income 2,836 5,533 50,653 13,886 Other expense (4,568) (5,791) (14,444) (15,079) --------- --------- ----------- ----------- Total (3,059) 10,936 39,068 10,001 --------- --------- ----------- ----------- Interest Expense Interest charges 49,497 52,527 144,645 151,332 Capitalized interest (4,506) (2,851) (13,537) (24,061) --------- --------- ----------- ----------- Total 44,991 49,676 131,108 127,271 --------- --------- ----------- ----------- Income From Continuing Operations Before Income Taxes 162,786 158,621 323,474 276,806 Income Taxes 58,900 49,961 117,574 96,054 --------- --------- ----------- ----------- Income From Continuing Operations 103,886 108,660 205,900 180,752 Income From Discontinued Operations - Net of Income Tax Expense 1,514 1,388 3,566 10,736 --------- --------- ----------- ----------- Net Income $105,400 $110,048 $209,466 $191,488 ========= ========= =========== =========== Weighted-Average Common Shares Outstanding - Basic 91,357 91,271 91,322 91,262 Weighted-Average Common Shares Outstanding - Diluted 91,491 91,467 91,430 91,432 Earnings Per Weighted- Average Common Share Outstanding Income From Continuing Operations - Basic $1.14 $1.19 $2.25 $1.98 Net Income - Basic $1.15 $1.21 $2.29 $2.10 Income From Continuing Operations - Diluted $1.14 $1.19 $2.25 $1.98 Net Income - Diluted $1.15 $1.20 $2.29 $2.09 Certain prior year amounts have been restated to conform to the 2004 presentation. *T