APS 2012 Annual Report Download - page 62

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Pinnacle West’s ability to meet its debt service obligations could be adversely affected because its
debt securities are structurally subordinated to the debt securities and other obligations of its
subsidiaries.
Because Pinnacle West is structured as a holding company, all existing and future debt and
other liabilities of our subsidiaries will be effectively senior in right of payment to our debt securities.
The assets and cash flows of our subsidiaries will be available, in the first instance, to service their own
debt and other obligations. Our ability to have the benefit of their cash flows, particularly in the case
of any insolvency or financial distress affecting our subsidiaries, would arise only through our equity
ownership interests in our subsidiaries and only after their creditors have been satisfied.
The market price of our common stock may be volatile.
The market price of our common stock could be subject to significant fluctuations in response
to factors such as the following, some of which are beyond our control:
• 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 or legislative developments;
• our dividend policy;
• future sales by the Company of equity or equity-linked securities; and
• general domestic and international economic conditions.
In addition, the stock market in general has experienced volatility that has often been unrelated
to the operating performance of a particular company. These broad market fluctuations may adversely
affect the market price of our common stock.
Certain provisions of our articles of incorporation and bylaws and of Arizona law make it difficult
for shareholders to change the composition of our board and may discourage takeover attempts.
These provisions, which could preclude our shareholders from receiving a change of control
premium, include the following:
• restrictions on 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;