Consolidation and Nature of Operations

3 Months Ended

Mar. 31, 2012

Consolidation and Nature of Operations

Consolidation and Nature of Operations

1.Consolidation and Nature of Operations

The unaudited condensed consolidated financial statements include the accounts of Pinnacle West and our subsidiaries: APS, SunCor Development Company (“SunCor”), El Dorado Investment Company (“El Dorado”) and formerly APS Energy Services Company, Inc. (“APSES”).  See Note 13 for discussion of the bankruptcy filing of SunCor and the sale of APSES.  Intercompany accounts and transactions between the consolidated companies have been eliminated.  The unaudited condensed consolidated financial statements for APS include the accounts of APS and the Palo Verde Nuclear Generating Station (“Palo Verde”) sale leaseback variable interest entities (“VIEs”) (see Note 7 for further discussion).  Our accounting records are maintained in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Weather conditions cause significant seasonal fluctuations in our revenues; therefore, results for interim periods do not necessarily represent results expected for the year.

Our condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments except as otherwise disclosed in the notes) that we believe are necessary for the fair presentation of our financial position, results of operations and cash flows for the periods presented.  These condensed consolidated financial statements and notes have been prepared consistently with the 2011 Form 10-K with the exception of the reclassification of certain prior year amounts on our Condensed Consolidated Statements of Income in accordance with accounting requirements for reporting discontinued operations (see Note 13) and to conform to current year presentation, and on our Condensed Consolidated Statements of Cash Flows to conform to the current year presentation.

See Note 16 for discussion of amended guidance on the presentation of comprehensive income.

The following tables show the impact of the reclassifications to prior year (previously reported) amounts (dollars in thousands):

Statement of Income for the Three Months Ended March 31, 2011	As previously reported			Reclassifications for discontinued operations and to conform to current year presentation			Amount reported after reclassification for discontinued operations and to conform to current year presentation
Operating Revenues
Regulated electricity segment revenues	$	647,974		$	(647,974	)	$	—
Other revenues	11,601			(11,601		)	—
Operating revenues	—			648,847			648,847
Operating Expenses
Operations and maintenance	256,486			(1,457		)	255,029
Depreciation and amortization	106,601			(18		)	106,583
Other expenses	9,716			(7,896		)	1,820
Other
Other expense	(1,699		)	(42		)	(1,741		)
Income Taxes	(5,649		)	(356		)	(6,005		)
Income From Continuing Operations	(9,325		)	(1,043		)	(10,368		)
Income From Discontinued Operations	(349		)	1,043			694

Statement of Cash Flows for the Three Months Ended March 31, 2011	As previously reported			Reclassifications to conform to current year presentation			Amount reported after reclassification to conform to current year presentation
Cash Flows from Operating Activities
Expenditures for real estate investments	$	(40	)	$	40		$	—
Gains and other changes in real estate assets	(3		)	3			—
Change in other long-term assets	(33,129		)	(40		)	(33,169		)
Change in other long-term liabilities	35,421			(3		)	35,418