APS 2009 Annual Report Download - page 5

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Our company experienced extraordinary change in
2009 and made important progress toward building
a nancially secure and sound future. The improving
prospects for Pinnacle West and APS in the years
ahead should excite and inspire all of us. We will
continue to drive the company forward by successfully
implementing well-considered strategies based on
our core strengths and corporate mission.
IMPROVING FINANCIAL OUTLOOk
At the top of the list of our 2009 accomplishments
sits the total return earned for our shareholders,
comprised of increases in our stock price and cash
dividends paid. This return of nearly 22 percent
clearly outperformed the electric utility industry
average of 5 percent and approached the S&P 500
Index’s overall return of 26 percent. The return to
shareholders reected both our company’s improving
nancial condition and a rising stock market.
Our consolidated on-going earnings for 2009 totaled
$236 million, or $2.33 per share, compared with
$238 million, or $2.36 per share, for 2008. As reported
in accordance with generally accepted accounting
principles, our consolidated earnings amounted to
$68 million, or $0.67 per share, for 2009 versus $242
million, or $2.40 per share, for the prior year. Our real
estate subsidiary, currently undergoing divestiture,
largely accounted for the difference between on-going
and reported earnings.
Although on-going earnings for 2009 remained relatively
at compared with 2008, we see a more promising
future. We estimate our consolidated on-going earnings
in 2010 will range from $2.95 per share to $3.10 per
share – about 30 percent higher than in 2009. In 2011,
we expect our earnings will reach, and might modestly
exceed, the guidance range established for 2010.
A comprehensive regulatory settlement that became
effective in January 2010 in combination with our keen
focus on operational excellence and cost management
should drive the increase in on-going earnings.
We recognize the importance of our dividend to our
shareholders. Our indicated annual dividend of $2.10
per share provides an attractive cash return with a
current dividend yield in the range of 5.5 to 6 percent
and an expected payout ratio of about 70 percent
based on our 2010 earnings outlook.
Disciplined nancial management provides the basis
for our nancial health. In combination with constructive
regulatory treatment, our cost management efforts
will improve our nancial posture. Our unrelenting focus
on cost control helped us come in under budget for
both operating expenses and capital expenditures in
2009. I believe our 2009 efforts have set the bar for
future performance. As we look to 2010, we expect
operating expenses, less the cost of programs
specically recovered through regulatory surcharges,
to approximate those of 2009.
SERVING DIVERSE COMMUNITIES
AND STAkEHOLDERS
Arizona provides an economically dynamic foundation
for our business. Over the past 20 years, our state has
ranked among the top ve states in population growth
and has rebounded strongly after each national
economic downturn. While we have shared in the
nation’s pain during the recent recession, Arizona’s
historic resilience will prevail once again because of
our state’s attractive quality of life. The number of
Arizona households should increase by approximately
50 percent by 2025, or 2.6 percent per year on
average, doubling the annual growth for the United
States as a whole.
Although we look for economic recovery to take hold
in 2010, the overbuilt construction in Arizona will slow
the rebound’s pace. Our current outlook predicts APS
average annual customer growth through 2012 at
about 1 percent with relatively at retail electricity
sales over the same timeframe. If Arizona’s economy
improves more quickly, we are positioned to benet.
Dear Fellow Shareholders: