PK ! F0 xl/worksheets/sheet1.xml
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PK ! xl/worksheets/sheet2.xml
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50
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PK ! = xl/worksheets/sheet4.xml
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PK ! rJ1 1 xl/worksheets/sheet5.xml
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PK !
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PK ! '_N N xl/worksheets/sheet7.xml
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PK ! r2Y# Y# xl/worksheets/sheet8.xml
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PK ! 1H\ xl/worksheets/sheet11.xml
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PK ! z^ xl/worksheets/sheet13.xml
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PK ! U~8 8 xl/worksheets/sheet14.xml
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PK ! > xl/worksheets/sheet16.xml
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PK ! | xl/worksheets/sheet17.xml
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PK ! l_ xl/worksheets/sheet18.xml
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PK ! v v xl/worksheets/sheet19.xml
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PK !
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208
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2960.190.01-0.4673
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298
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2960.190.01-0.460.01
|
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PK ! xl/worksheets/sheet21.xml
208
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30447559785
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306311-731
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307
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PK ! m] ] xl/worksheets/sheet22.xml
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54
55
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256755778675089
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PK ! *Rt t xl/worksheets/sheet23.xml
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5657
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318
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63106961106970
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PK ! J J xl/worksheets/sheet24.xml
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5657
102
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328105467729120407
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PK ! $ xl/worksheets/sheet25.xml
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PK ! *M[E E xl/worksheets/sheet26.xml
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|
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|
360
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PK ! :Q\#W W xl/worksheets/sheet27.xml
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PK ! 8FF xl/worksheets/sheet30.xml
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PK ! O xl/worksheets/sheet31.xml
363
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|
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PK ! F xl/worksheets/sheet32.xml
363
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PK ! 4 xl/worksheets/sheet33.xml
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PK ! PcI xl/worksheets/sheet35.xml
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PK ! ( l l xl/worksheets/sheet36.xml
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PK ! xl/worksheets/sheet37.xml
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PK ! 0#6 xl/worksheets/sheet38.xml
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PK ! 6XI8 8 xl/worksheets/sheet39.xml
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PK ! xl/worksheets/sheet40.xml
429
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|
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PK ! xl/worksheets/sheet41.xml
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PK ! hw4 xl/worksheets/sheet42.xml
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PK ! 6CJ xl/worksheets/sheet43.xml
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PK !
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PK ! )! )! xl/worksheets/sheet45.xml
479
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PK ! ;ey y xl/worksheets/sheet46.xml
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For the transition period from toExact Name of Each Registrant as specified inCommissionits charter; State of Incorporation; Address;IRS EmployerFile Numberand Telephone NumberIdentification No.1-8962PINNACLE WEST CAPITAL CORPORATION86-0512431(an Arizona corporation)400 North Fifth Street, P.O. Box 53999Phoenix, Arizona 85072-3999(602) 250-10001-4473ARIZONA PUBLIC SERVICE COMPANY86-0011170Number of shares of common stock, no
par value, outstanding as of November
7, 2005: 99,000,520Number of shares of common stock, $2.50
par value, outstanding as of November
7, 2005: 71,264,947TABLE OF CONTENTSPageGlossaryPart IItem 1.Financial StatementsPinnacle West Capital CorporationArizona Public Service CompanyItem 2.Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3.Quantitative and Qualitative Disclosures About Market RiskItem 4.Controls and ProceduresPart IILegal ProceedingsItem 5.Other InformationItem 6.ExhibitsSignaturesExhibit 12.1Exhibit 12.2Exhibit 31.1Exhibit 31.2Exhibit 31.3Exhibit 31.4Exhibit 32.1Exhibit 32.2Exhibit 99.1Exhibit 99.2Exhibit 99.3Exhibit 99.4CONDENSED CONSOLIDATED STATEMENTS OF INCOMEThree Months EndedSeptember 30,20052004OPERATING REVENUESRegulated electricity segmentMarketing and trading segmentReal estate segmentOther revenuesTotalOPERATING EXPENSESRegulated electricity segment fuel and purchased powerMarketing and trading segment fuel and purchased powerOperations and maintenanceReal estate operations segmentDepreciation and amortizationTaxes other than income taxesOther expensesRegulatory disallowance (Note 5)OPERATING INCOMEOTHERAllowance for equity funds used during constructionOther income (Note 14)Other expense (Note 14)INTEREST EXPENSEInterest chargesCapitalized interestINCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXESINCOME TAXESINCOME FROM CONTINUING OPERATIONSINCOME FROM DISCONTINUED OPERATIONSNet of income tax expense of $12,407 and $890 (Note 17)NET INCOMEWEIGHTED-AVERAGE COMMON SHARES
OUTSTANDING BASICWEIGHTED-AVERAGE COMMON SHARES
OUTSTANDING DILUTEDEARNINGS PER WEIGHTED AVERAGE
COMMON SHARE OUTSTANDINGIncome from continuing operations basicNet income basicIncome from continuing operations dilutedNet income dilutedDIVIDENDS DECLARED PER SHAREPINNACLE WEST CAPITAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOMENine Months EndedINCOME (LOSS) FROM DISCONTINUED OPERATIONSNet of
income tax expense (benefit) of $(28,586) and $707 (Note 17)PINNACLE WEST CAPITAL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETSDecember 31,ASSETSCURRENT ASSETSCash and cash equivalentsInvestments in debt securitiesCustomer and other receivablesAllowance for doubtful accountsMaterials and supplies (at average cost)Fossil fuel (at average cost)Assets from risk management and trading
activities (Note 10)Assets held for sale (Note 17)Other current assetsTotal current assetsINVESTMENTS AND OTHER ASSETSReal estate investments netAssets from long-term risk management and
trading activities (Note 10)Decommissioning trust accountsOther assetsTotal investments and other assetsPROPERTY, PLANT AND EQUIPMENTPlant in service and held for future useLess accumulated depreciation and amortizationConstruction work in progressIntangible assets, net of accumulated amortizationNuclear fuel, net of accumulated amortizationNet property, plant and equipmentDEFERRED DEBITSDeferred fuel and purchased power regulatory
asset (Note 5)Other regulatory assetsOther deferred debitsTotal deferred debitsTOTAL ASSETSLIABILITIES AND COMMON STOCK EQUITYCURRENT LIABILITIESAccounts payableAccrued taxesAccrued interestShort-term borrowingsCurrent maturities of long-term debtCustomer depositsDeferred income taxesLiabilities from risk management and trading
activities (Note 10)Other current liabilitiesTotal current liabilitiesLONG-TERM DEBT LESS CURRENT MATURITIESDEFERRED CREDITS AND OTHERRegulatory liabilitiesLiability for asset retirementsPension liabilityLiabilities from long term risk management
and trading activities (Note 10)Unamortized gain sale of utility plantOtherTotal deferred credits and otherCOMMITMENTS AND CONTINGENCIES (Notes 5, 12, 13
and 15)COMMON STOCK EQUITYCommon stock, no par valueTreasury stockTotal common stockAccumulated other comprehensive income (loss)
(Note 11):Minimum pension liability adjustmentDerivative instrumentsTotal accumulated other comprehensive
income (loss)Retained earningsTotal common stock equityTOTAL LIABILITIES AND COMMON STOCK EQUITYPINNACLE WEST CAPITAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSCASH FLOWS FROM OPERATING ACTIVITIESNet IncomeAdjustment to reconcile net income to net cash provided by
operating activities:Silverhawk impairment lossRegulatory disallowanceEquity earnings in Phoenix Suns partnershipDepreciation and amortization including nuclear fuelDeferred fuel and purchased powerChange in mark-to-market valuationsChanges in current assets and liabilities:Materials, supplies and fossil fuelProceeds from the sale of real estate assetsReal estate investmentsChange in risk management and trading-assetsChange in risk management and trading-liabilitiesChange in other long-term assetsChange in other long-term liabilitiesNet cash flow provided by operating activitiesCASH FLOWS FROM INVESTING ACTIVITIESCapital expendituresPurchase of
Sundance PlantProceeds from the sale of 25% of SilverhawkPurchases of investment securitiesProceeds from sale of investment securitiesProceeds from real estate investmentsProceeds from sale of the Phoenix Suns partnershipNet cash flow used for investing activitiesCASH FLOWS FROM FINANCING ACTIVITIESIssuance of long-term debtShort-term borrowings and payments netDividends paid on common stockRepayment of long-term debtCommon stock equity issuanceNet cash flow provided by (used for) financing activitiesNET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTSCASH AND CASH EQUIVALENTS AT BEGINNING OF PERIODCASH AND CASH EQUIVALENTS AT END OF PERIODSupplemental disclosure of cash flow informationCash paid during the period for:Income taxes paid, net of refundsInterest paid, net of amounts capitalizedPINNACLE WEST CAPITAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS$501 million in 2005;$384 million in 2006;$28 million in 2007;$6 million in 2008;$1 million in 2009; and$2.458 billion thereafter.Annual RevenueIncreasePercent IncreaseIncreased
fuel and purchased power costs(a)12.0%Capital structure updateRate base update, including acquisition of
the Sundance PlantPension
fundingOther itemsTotal increase19.9%PPL EnergyPlus, LLC agreed to provide 112 MW in July through September of 2003
and 150 MW in June through September of 2004 and 2005, by means of a unit contingent
contract.Panda Gila River LP agreed to provide 450 MW in October of 2003 and 2004 and
May of 2004 and 2005, and 225 MW from November 2003 through April 2004 and from
November 2004 through April 2005, by means of firm call options.Pension BenefitsOther BenefitsThree MonthsNine MonthsEndedService cost-benefits earned
during the periodInterest cost on benefit
obligationExpected return on plan assetsAmortization of:Transition (asset)
obligationPrior service costNet actuarial lossNet periodic benefit costPortion of cost charged to
expenseAPS share of costs charged
to expenseOperating Revenues:Regulated electricity (a)Marketing and trading (a)Real estateNet Income (Loss):Regulated electricity (b)Marketing and trading (c)Other (d)As ofSeptember 30, 2005December 31, 2004Assets:Regulated electricityMarketing and tradingGains on the
ineffective portion
of derivatives
qualifying for
hedge accountingGains from
the change in
options time value
excluded from
measurement of
effectivenessGains from the
discontinuance of
cash flow hedgesInvestmentsDeferredCurrentand OtherCredits andNet AssetAssetsLiabilities(Liability)Regulated electricity:Mark-to-marketFutures and
options margin
accountMarketing
and trading:Options and futures
and emission
allowances
at costNet incomeOther comprehensive income:Net unrealized gains on
derivative instruments (a)Net reclassification of
realized gains to income (b)Net income tax expense
related to items of other
comprehensive incomeTotal other comprehensive incomeComprehensive incomeOther income:Investment gains net (a)$Interest incomeSunCor (b)Asset salesMiscellaneousTotal other incomeOther expense:Non-operating costs (c)Investment losses netTotal other expenseBasic earnings per share:Income from continuing operationsIncome (loss) from discontinued
operationsEarnings per share basicDiluted earnings per share:Earnings per share dilutedRevenue:SilverhawkSunCor commercial operationsNACTotal revenueIncome (loss) before taxes:Total income (loss) before taxesIncome (loss) after taxes:Total income (loss) after taxesCONDENSED STATEMENTS OF INCOMEELECTRIC OPERATING REVENUES (LOSSES)Regulated electricity fuel and purchased powerMarketing and trading fuel and purchased powerIncome taxesOther taxesOTHER INCOME (DEDUCTIONS)Other income (Note S-4)Other expense (Note S-4)INTEREST DEDUCTIONSInterest on long-term debtInterest on short-term borrowingsDebt discount, premium and expenseARIZONA PUBLIC SERVICE COMPANY CONDENSED STATEMENTS OF INCOMEELECTRIC OPERATING REVENUESRegulated
electricity fuel and purchased powerMarketing
and trading fuel and purchased powerARIZONA PUBLIC SERVICE COMPANY CONDENSED BALANCE SHEETSUTILITY PLANTElectric plant in service and held for future useUtility plant netNote receivable from Pinnacle West Energy
(Note S-5)Assets from long-term risk management and trading
activities (Note S-2)Assets from risk management and trading activities (Note
S-2)Deferred fuel and purchased power regulatory asset (Note 5)Unamortized debt issue costsCAPITALIZATION AND LIABILITIESCAPITALIZATIONCommon stockAdditional paid-in capitalAccumulated other comprehensive income (loss):Common stock equityLong-term debt less current maturitiesTotal capitalizationLiabilities from risk management and trading activities (Note S-2)Account payable to Pinnacle West Energy (Note S-5)Customer advances for constructionLiabilities from long term risk management and trading
activities (Note S-2)COMMITMENTS AND CONTINGENCIES (Notes 5, 12, 13, 15 and S-5)TOTAL CAPITALIZATION AND LIABILITIESARIZONA PUBLIC SERVICE COMPANY CONDENSED STATEMENTS OF CASH FLOWSAdjustments to reconcile net income to net cash provided
by operating
activities:Increase in regulatory assetsIncrease in regulatory liabilitiesChange in customer advancesPurchase of Sundance PlantRepayment of loan by Pinnacle West EnergyEquity infusionRepayment and reacquisition of long-term debtNet cash flow used for financing activitiesNET INCREASE IN CASH AND CASH EQUIVALENTSSupplemental disclosure of cash flow information:Cash paid during the year for:Interest, net of amounts capitalizedARIZONA PUBLIC SERVICE COMPANY SUPPLEMENTAL NOTES TO THE CONDENSED FINANCIAL STATEMENTS$1 million in 2005;$86 million in 2006;$1 million in 2008;$2.458 billion, thereafter.Cash Flow HedgesGains (losses) on the ineffective
portion of derivatives qualifying
for hedge accountingGains from the change in
options time value excluded from
measurement of effectivenessGains from the discontinuance of
cash flow hedgesRegulated Electricity:Marketing and Trading:Options at costInvestment gains netNon-operating costs (a)S-5. Related Party TransactionsElectric operating revenues:Pinnacle West marketing
and tradingPinnacle West EnergyPurchased power and fuel costs:Other:Pinnacle West Energy
interest incomeNet intercompany receivables (payables):Pinnacle West marketing and
tradingAPS Energy ServicesPinnacle WestOther (a)Discontinued operations net of tax:Marketing and trading (b)Real estate (c)CAPITAL EXPENDITURESEstimated for the Year Ended20062007APSDeliveryGeneration (a)Other (b)SubtotalSunCor (c)Contractual Obligationspurchased power and fuel commitments, which increased from approximately $855
million at December 31, 2004 to $1.1 billion at September 30, 2005 primarily due to
increased commitments for the years 2005 through 2007; andnuclear decommissioning funding requirements, which increased from approximately
$201 million at December 31, 2004 to $386 million at September 30, 2005 for
the years 2005 and thereafter as a result of the 2004 Settlement Agreement.September 30, 2004RegulatedMarketingElectricityand TradingMark-to-market of net positions
at beginning of periodRecognized in earnings:Change in mark-to-market
gains for future period
deliveriesMark-to-market
(gains)/losses realized
during the periodRecognized in OCI:Change in mark-to-market
gains for future period
deliveries (a)Mark-to-market gains realized
during the periodDeferred as a Regulatory
LiabilityChange in valuation techniquesMark-to-market of net positions
at end of periodRegulated ElectricityfairSource of Fair Value2008valuePrices actively quotedPrices provided by other external
sourcesPrices based on models and other
valuation methodsTotal by maturityMarketing and Trading2009ThereafterPrices provided by
other external sourcesPrices based on models
and other valuation
methodsGain (Loss)Price UpPrice Down10%CommodityMark-to-market changes
reported in earnings (a):Natural gasMark-to-market changes
reported in OCI (b):ARIZONA PUBLIC SERVICE COMPANY — LIQUIDITY AND CAPITAL RESOURCESpurchased power and fuel commitments, which increased from approximately $948
million at December 31, 2004 to $1.1 billion at September 30, 2005 primarily due to
increased commitments for the years 2005 through 2007; andnuclear decommissioning funding requirements, which increased from approximately
$201 million at December 31, 2004 to $386 million at September 30, 2005 for the years
2005 and thereafter as a result of the 2004 Settlement Agreement.ExhibitDateNo.Registrant(s)DescriptionPreviously
Filed as
Exhibit1EffectiveArticles of
Incorporation,
restated as of July
29, 198819.1 to Pinnacle Wests September 1988
Form 10-Q Report, File No. 1-896211-14-88Pinnacle West
Capital Corporation
Bylaws, amended as
of June 23, 20043.1 to Pinnacle Wests June 30, 2004
Form 10-Q Report, File No. 1-89628-9-04Articles of
Incorporation,
restated as of May
25, 19884.2 to APS Form S-3 Registration Nos.
33-33910 and 33-55248 by means of
September 24, 1993 Form 8-K Report,
File No. 1-44739-29-93Arizona Public
Service Company
Bylaws, amended as
of June 23, 20043.1 to APS June 30, 2004 Form 10-Q
Report, File No. 1-4473PINNACLE WEST CAPITAL CORPORATION COMPUTATION OF EARNINGS TO FIXED CHARGES ($000’s)Twelve Months Ended2003200220012000Earnings:Income From Continuing
OperationsIncome TaxesFixed ChargesTotal EarningsFixed Charges:Interest ExpenseEstimated Interest
Portion
of Annual RentsTotal Fixed ChargesRatio of Earnings to Fixed
Charges (rounded down)ARIZONA PUBLIC SERVICE COMPANY COMPUTATION OF EARNINGS TO FIXED CHARGES ($000’s)Interest ChargesAmortization of
Debt DiscountCERTIFICATIONI have reviewed this Quarterly Report on Form 10-Q of Pinnacle West Capital Corporation;Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report;Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report;The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:a)designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in
which this report is being prepared;b)designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;c)evaluated the effectiveness of the registrants disclosure controls and
procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; andd)disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the registrants internal control over
financial reporting; andall significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrants ability to record, process, summarize and report
financial information; andany fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal control over
financial reporting./s/ William J. PostWilliam J. PostChairman and Chief Executive Officerdisclosed in this report any change in the registrants internal control over
financial reporting that occurred during the registrants most
recent fiscal
quarter that has materially affected, or is reasonably likely to materially affect,
the registrants internal control over financial reporting; and/s/ Donald E. BrandtDonald E. BrandtExecutive Vice President &Chief Financial OfficerI have reviewed this Quarterly Report on Form 10-Q of Arizona Public Service Company;disclosed in this report any change in the registrants internal control over
financial reporting that occurred during the registrants most recent fiscal
quarter that has materially affected, or is reasonably likely to materially affect, the
registrants internal control over financial reporting; and/s/ Jack E. DavisJack E. DavisPresident and Chief Executive Officerdisclosed in this report any change in the registrants internal control over
financial reporting that occurred during the registrants most recent fiscal
quarter that has materially affected, or is reasonably likely to materially affect,
the registrants internal control over financial reporting; and/s/ Donald E. BrandtSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002/s/ Donald E. BrandtExecutive Vice President and/s/ Jack E. DavisPINNACLE WEST RISK FACTORSan economic downturn;capital market conditions generally;the bankruptcy of an unrelated energy company;increased market prices for electricity and gas;terrorist attacks or threatened attacks on our facilities or those of
unrelated energy companies; orthe overall health of the utility industry.increasing the cost of future debt financing;increasing our vulnerability to adverse economic and industry conditions;requiring us to dedicate a substantial portion of our cash flow from
operations to payments on our debt, which would reduce funds available
to us for operations, future business opportunities or other purposes;
andplacing us at a competitive disadvantage compared to our competitors
that have less debt.Actual results could differ from estimates used to prepare our financial statements.Regulatory Accounting Regulatory accounting allows for the actions
of regulators, such as the ACC and the FERC, to be reflected in our
financial statements. Their actions may cause us to capitalize costs
that would otherwise be included as an expense in the current period
by unregulated companies. If future recovery of costs ceases to be
probable, the assets would be written off as a charge in current
period earnings. We had approximately $288 million of regulatory
assets on our Condensed Consolidated Balance Sheets at September 30,
2005.Pensions and Other Postretirement Benefit Accounting Changes in our
actuarial assumptions used in calculating our pension and other
postretirement benefit liability and expense can have a significant
impact on our earnings and financial position. The most relevant
actuarial assumptions are the discount rate used to measure our
liability and net periodic cost, the expected long-term rate of return
on plan assets used to estimate earnings on invested funds over the
long-term, and the assumed healthcare cost trend rates. We review
these assumptions on an annual basis and adjust them as necessary.Derivative Accounting Derivative accounting requires evaluation of
rules that are complex and subject to varying interpretations. Our
evaluation of these rules, as they apply to our contracts, will
determine whether we use accrual accounting (for contracts designated
as normal) or fair value (mark-to-market) accounting. Mark-to-market
accounting requires that changes in the fair value are recognized
periodically in income unless certain hedge criteria are met. For
fair value hedges, the gain or loss on the derivative as well as the
offsetting loss or gain on the hedged item associated with the hedged
risk are recognized in earnings. For cash flow hedges, changes in the
fair value of the derivative are recognized in common stock equity (as
a component of other comprehensive income (loss)).The market price of our common stock may be volatile.variations in our quarterly operating results;operating results that vary from the expectations of management, securities
analysts and investors;changes in expectations as to our future financial performance, including
financial estimates by securities analysts and investors;developments generally affecting industries in which we operate, particularly
the energy distribution and energy generation industries;announcements by us or our competitors of significant contracts, acquisitions,
joint marketing relationships, joint ventures or capital commitments;announcements by third parties of significant claims or proceedings against us;favorable or adverse regulatory developments;our dividend policy;future sales of our equity or equity-linked securities; andgeneral domestic and international economic conditions.We may enter into credit and other agreements from time to time that restrict our ability to pay dividends.provisions of our bylaws and Arizona law that restrict our ability to
engage in a wide range of business combination transactions with an
interested shareholder (generally, any person who owns 10% or more
of our outstanding voting power or any of our affiliates or
associates) or any affiliate or associate of an interested
shareholder, unless specific conditions are met;anti-greenmail provisions of Arizona law and our bylaws that prohibit
us from purchasing shares of our voting stock from beneficial owners
of more than 5% of our outstanding shares unless specified conditions
are satisfied;provisions of our bylaws and Arizona law that provide that shareholder
action may be taken only at an annual or special meeting or by
unanimous written consent, and provisions of our bylaws that provide
that a special meeting of shareholders may only be called by a
majority of our Board of Directors, the Chairman of our Board of
Directors, or our President;advance notice procedures for nominating candidates to our Board of
Directors or presenting matters at shareholder meetings;provisions of our articles and bylaws that provide for a staggered
Board of Directors;provisions of our bylaws that provide that shareholders may only
remove a director with or without cause if the votes cast in favor of
such removal exceed the votes cast against such removal (with special
requirements, based on cumulative voting rights, if less than the
entire board is to be removed); andthe ability of our Board of Directors to issue additional shares of
common stock and shares of preferred stock and to determine the price
and, with respect to preferred stock, the other terms, including
preferences and voting rights, of those shares without shareholder
approval.APS RISK FACTORSterrorist attacks or threatened attacks on our facilities or those of unrelated energy companies; orrequiring us to dedicate a substantial portion of our cash flow from operations to
payments on our debt, which would reduce funds available to us for operations, future
business opportunities or other purposes; andplacing us at a competitive disadvantage compared to our competitors that have less debt.Regulatory Accounting Regulatory accounting allows for the actions
of regulators, such as the ACC and the FERC, to be reflected in our
financial statements. Their actions may cause us to capitalize costs
that would otherwise be included as an expense in the current period
by unregulated companies. If future recovery of costs ceases to be
probable, the assets would be written off as a charge in current
period earnings. We had approximately $288 million of regulatory
assets on our Condensed Balance Sheets at September 30, 2005.(GAAP MEASURE) TO GROSS MARGIN (NON-GAAP FINANCIAL MEASURE)THREE MONTHS ENDEDPretaxAfter TaxSEPTEMBER 30,(Decrease)RECONCILIATION OF REGULATED ELECTRICITY SEGMENT GROSS MARGINOperating Income (closest GAAP measure)Plus:Real estate segment operationsMarketing and trading segment purchased power and fuelLess:Real estate segment revenuesMarketing and trading segment revenuesRegulated electricity segment gross marginRECONCILIATION OF MARKETING AND TRADING SEGMENT GROSS MARGINRegulated electricity segment purchased power and fuelRegulated electricity segment revenuesMarketing and trading segment gross marginPINNACLE WEST CAPITAL CORPORATION NON-GAAP FINANCIAL MEASURE RECONCILIATION — OPERATING INCOME (GAAP MEASURE) TO GROSS MARGIN (NON-GAAP FINANCIAL MEASURE)NINE MONTHS ENDEDARIZONA PUBLIC SERVICE COMPANY NON-GAAP FINANCIAL MEASURE RECONCILIATION — OPERATING INCOME (GAAP MEASURE) TO GROSS MARGIN (NON-GAAP FINANCIAL MEASURE)RECONCILIATION OF GROSS MARGINGross marginPK ! vbx x docProps/app.xml
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