news-release-details

Pinnacle West 2003 Earnings In Line With Expectations

01/29/2004

PHOENIX – Pinnacle West Capital Corporation (NYSE: PNW) today reported consolidated net income for the year 2003 of $240.6 million, or $2.63 per diluted share of common stock. This result compares with $149.4 million, or $1.76 per share, for the year 2002. Arizona Public Service (APS) reported net income for 2003 of $180.9 million, compared with $199.3 million for 2002. APS’ on-going earnings were $168.7 million for 2003 versus $219.6 million for the prior year.

On-going consolidated earnings in 2003 were $223.4 million, or $2.44 per share, compared with $302.1 million, or $3.56 per share, for the prior year. On-going earnings exclude income tax credits related to prior years and recorded in 2003 of $17.2 million, or $0.19 per share; previously disclosed, non-recurring charges in 2002 totaling $87.0 million, or $1.03 per share; and a 2002 charge for the cumulative effect of an accounting change of $65.7 million, or $0.77 per share.

"Earnings for the year were in line with our guidance, and our operational performance and market area remained strong," said Chairman Bill Post, citing vibrant customer growth of 3.3 percent, about three times the national average. In addition, retail electricity consumption hit record levels, with the Company experiencing a 9 percent increase in its peak demand and a 5 percent increase in total retail kilowatt-hour sales.

Looking forward, Post said, "The Company needs to achieve a constructive regulatory outcome in our pending rate case to cover the costs of providing reliable service for our retail customers."

APS’ on-going earnings exclude income tax credits related to prior years and recorded in 2003 of $12.2 million, and previously disclosed, non-recurring severance charges in 2002 of $20.3 million. These lower results were due to deterioration in the western wholesale power market; higher hedged natural gas and purchased power prices; retail electricity price decreases; and other operating cost increases necessary to meet the growing demand of retail customers, which were partially offset by the effects of higher retail sales due to customer growth and favorable weather. These higher costs – and the Company’s investment in new power plants and other infrastructure – are currently under review by the Arizona Corporation Commission. A decision on their recovery in rates is anticipated before the end of 2004.

In addition to APS’ earnings variances, Pinnacle West’s consolidated results were impacted by deterioration in the western wholesale power markets; an increase in fixed costs related to placing new electricity-generating units into service in 2002 and 2003; and improved results from the Company’s unregulated subsidiaries.

Consistent with its accelerated asset sales program for 2003-2005, SunCor Development Co., Pinnacle West’s real estate subsidiary, delivered solid, on-plan performance, reporting 2003 net income of $56.1 million, compared with net income of $18.9 million for 2002.

For the 2003 fourth quarter, the Company reported consolidated net income of $49.1 million, or $0.54 per diluted share, compared with a net loss of $80.6 million, or $0.95 per share, in the comparable 2002 period. On-going consolidated earnings in the 2003 fourth quarter were $38.4 million, or $0.42 per share, compared with $44.5 million, or $0.52 per share. On-going earnings exclude income tax credits related to prior years and recorded in 2003 totaling $10.7 million, or $0.12 per share; previously disclosed, non-recurring charges in 2002’s fourth quarter totaling $59.4 million, or $0.70 per share; and a 2002 charge for the cumulative effect of a change in accounting of $65.7 million, or $0.77 per share. In addition, fourth quarter earnings reflect an increase in SunCor’s earnings of $29.4 million, or $0.33 per share, compared with the prior year’s same period.

All dollar amounts included in this release are reported after income tax effects. For more information on Pinnacle West’s operating statistics and earnings, please visit http:www.pinnaclewest.com/investors/presentations/default.html.

Pinnacle West is a Phoenix-based company with consolidated assets of approximately $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 11:30 a.m. (ET) today, Thursday, January 29 to discuss its earnings and recent events. The webcast can be accessed at http:www.pinnaclewest.com/investors/presentations/default.html and will be available for replay on the website for 30 days. To access the conference call by telephone, dial (877) 356-3961 and enter reservation number 4861194. A replay of the call also will be available until 12:00 midnight (ET), Thursday, February 5, 2004, by calling (800) 642-1687 in the U.S. and Canada or (706) 645-9291 internationally and entering the same reservation number.

Contacts

Media:
Alan Bunnell, (602) 250-3376

Analyst:
Rebecca Hickman, (602) 250-5668
Lisa Malagon, (602) 250-5671

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