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Pinnacle West Capital: Pinnacle West Reports Higher Third-Quarter Earnings

The following excerpt is from the company's SEC filing.

Quarterly financial results benefit from higher retail sales and warmer weather

Disciplined cost management and strong operational performance also contribute to bottom line

Company affirms 2015 guidance, introduces 2016 guidance

PHOENIX -Pinnacle West Capital Corp. (NYSE: PNW) today reported consolidated net income attributable to common shareholders for the 2015 third quarter of $257.1 million, or $2.30 per diluted share. This result compares with net income of $244.0 million, or $2.20 per share, for the same period a year ago.

“It was a solid quarter for us. An increase in retail sale s, ongoing cost management and superior operational performance all contributed to sound financial results,” said Pinnacle West Chairman, President and Chief Executive Officer Don Brandt

adding that quarter-over-quarter weather-normalized sales growth has been positive four out of the past seven quarters.

“Operationally, our employees stepped up during what proved to be one of the most challenging storm seasons in years,” he said. “Our crews performed well under tough conditions, and employees across all departments responded with the high-quality service our customers have come to expect from APS.”

The 2015 third-quarter results comparison was positively impacted by the following major factors:

Adjustment mechanisms

improved earnings by $0.17 per share compared to the 2014 third quarter. These adjustors included a Jan. 1, 2015, rate change reflecting acquisition of Southern California Edison’s interest in Units 4 and 5 of the Four Corners Power Plant; increased transmission revenues; revenue from the Company’s AZ Sun Program; and higher lost fixed cost recovery (LFCR) revenue.


retail electricity sales

excluding the effects of weather variations, but including the effects of customer conservation, energy efficiency programs and distributed renewable generation - improved earnings $0.08 per share. Compared to the same quarter a year ago, weather-normalized retail sales improved 2.1 percent, while total customer growth increased 1.3 percent quarter-over-quarter.

The effects of weather variations

improved results by $0.04 per share compared to the year-ago period. Highlighted by the second hottest August in 20 years, this year’s third quarter was warmer than the same period last year (104.3 degrees average high

temperatures versus 102.9 degrees) and slightly more favorable (0.5 percent) than normal based on a rolling 10-year average. As a result, residential cooling degree-days (a measure of the effects of weather) were 10.5 percent greater than last year’s third quarter and 3.3 percent better than normal 10-year averages.

These positive factors were partially offset by the following items:

Higher depreciation and amortization expenses

, largely associated with the Four Corners transaction and additional plant in service, reduced earnings by $0.12 per share.

Expiration of a long-term wholesale contract

at the end of 2014 decreased earnings by $0.02 per share.

The net effect of miscellaneous items

decreased earnings $0.05 per share.

Financial Outlook

For 2015, the Company continues to expect its on-going consolidated earnings will be within a range of $3.75 to $3.95 per diluted share, on a weather-normalized basis.

Looking ahead to 2016, the Company estimates its on-going consolidated earnings will be within a range of $3.90 to $4.10 per diluted...