APS 2012 Annual Report Download - page 137

PINNACLE WEST CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
112
(a) In April 2010, Pinnacle West issued 6,900,000 shares of common stock at an offering
price of $38.00 per share, resulting in net proceeds of approximately $253 million.
Pinnacle West contributed all of the net proceeds from this offering into APS in the form
of equity infusions. APS has used these contributions to repay short-term indebtedness,
to finance capital expenditures and for other general corporate purposes.
(b) Primarily represents shares of common stock withheld from certain stock awards for tax
purposes.
At December 31, 2012, Pinnacle West had 10 million shares of serial preferred stock authorized
with no par value, none of which was outstanding, and APS had 15,535,000 shares of various types of
preferred stock authorized with $25, $50 and $100 par values, none of which was outstanding.
8. Retirement Plans and Other Benefits
Pinnacle West sponsors a qualified defined benefit and account balance pension plan (The
Pinnacle West Capital Corporation Retirement Plan) and a non-qualified supplemental excess benefit
retirement plan for the employees of Pinnacle West and its subsidiaries. All new employees participate
in the account balance plan. Defined benefit plans specify the amount of benefits a plan participant is to
receive using information about the participant. The pension plan covers nearly all employees. The
supplemental excess benefit retirement plan covers officers of the Company and highly compensated
employees designated for participation by the Board of Directors. Our employees do not contribute to
the plans. Generally, we calculate the benefits based on age, years of service and pay.
Pinnacle West also sponsors another postretirement benefit plan (Pinnacle West Capital
Corporation Group Life and Medical Plan) for the employees of Pinnacle West and its subsidiaries.
This plan provides medical and life insurance benefits to retired employees. Employees must retire to
become eligible for these retirement benefits, which are based on years of service and age. For the
medical insurance plan, retirees make contributions to cover a portion of the plan costs. For the life
insurance plan, retirees do not make contributions. We retain the right to change or eliminate these
benefits.
Pinnacle West uses a December 31 measurement date each year for its pension and other
postretirement benefit plans. The market-related value of our plan assets is their fair value at the
measurement date. See Note 14 for discussion of how fair values are determined. Due to subjective
and complex judgments, which may be required in determining fair values, actual results could differ
from the results estimated through the application of these methods.
A significant portion of the changes in the actuarial gains and losses of our pension and
postretirement plans is attributable to APS and therefore is recoverable in rates. Accordingly, these
changes are recorded as a regulatory asset. In its 2009 retail rate case settlement, APS received
approval to defer a portion of pension and other postretirement benefit cost increases incurred in 2011
and 2012. We deferred pension and other postretirement benefit costs of approximately $14 million in
2012 and $11 million in 2011. Pursuant to an ACC regulatory order, we began amortizing the
regulatory asset over 3 years beginning in July 2012. We amortized approximately $4 million during
2012.
On March 23, 2010, the President signed into law comprehensive health care reform legislation
under the Patient Protection and Affordable Care Act (the “Act”). One feature of the Act is the