Exhibit 99.01
El Paso Electric
NEWS RELEASE
For Immediate Release | Contact: | |||
Date:April 29, 2003 | Media | Analyst | ||
Teresa Souza 915/543-5823 | Cynthia Gamez 915/543-2213 |
El Paso Electric Announces First Quarter Financial Results
El Paso Electric (NYSE: EE) today reported net income before the cumulative effect of a change in accounting principle for the quarter ended March 31, 2003 of $2.1 million, or $0.04 basic and diluted income per share. Net income for the same period last year was $5.9 million, or $0.12 basic and diluted earnings per share. Net income for the quarter ended March 31, 2003 includes a cumulative effect of a change in accounting principle related to the adoption of SFAS No. 143 “Accounting for Asset Retirement Obligations” on January 1, 2003. SFAS No. 143 provides guidance on the recognition and measurement of liabilities associated with the retirement of tangible long-lived assets. SFAS No. 143 affected the accounting for the decommissioning of EE’s Palo Verde and Four Corners Stations and changed the method used to report the decommissioning obligation. For the quarter ended March 31, 2003, the cumulative effect of this change in accounting principle, net of related income taxes, was $39.6 million, or $0.81 and $0.80 basic and diluted earnings per share, respectively. Net income for the quarter ended March 31, 2003 including the cumulative effect of a change in accounting principle was $41.7 million, or $0.85 and $0.84 basic and diluted earnings per share, respectively.
The decrease in earnings prior to the application of SFAS No. 143 for the quarter ended March 31, 2003 when compared to the quarter ended March 31, 2002 resulted primarily from decreased wholesale sales revenue related to the expiration of two long-term contracts, increased maintenance expense at local plants and increased pensions and benefits expense. These decreases in earnings were partially offset by increased margins on economy sales and a loss on extinguishment of debt recorded in the prior year without any offsetting amounts in the current year.
“We are encouraged that expired long-term wholesale sales to two former customers have been replaced, in part, by sales on the economy market,” said Gary Hedrick, President and CEO, “and our core business remains strong as reflected in the growth in our customer base. On the expense side, we are committed to controlling our costs and expect to mitigate unexpected first quarter expenses through cost containment in the final three quarters of 2003.”
During the quarter EE repurchased 0.4 million shares of common stock in the open market in accordance with the previously approved stock repurchase programs which in total permit the repurchase of 15 million shares. To date, almost 13.4 million shares have been repurchased for approximately $151.5 million, including
Page 1 of 8
El Paso Electric · P.O. Box 982 · El Paso, Texas 79960
commissions. EE may continue making purchases of its stock at open market prices and may engage in private transactions, where appropriate.
EE has repurchased $550.5 million of first mortgage bonds with internally generated cash since inception of its deleveraging program in 1996. During the first quarter of 2003, EE repurchased or retired $39.4 million of the Series C First Mortgage Bonds which matured in the first quarter of 2003. Common stock equity as a percentage of capitalization, including current portion of long-term debt and financing obligations, was approximately 44% as of March 31, 2003 as compared to 19% in February 1996.
EBITDA
The change in earnings before interest, income taxes, depreciation and amortization (“EBITDA”) for the three month period ended March 31, 2003, compared to the same periods in 2002, is as follows (in thousands):
March 31, 2002 | $ | 46,438 |
| |
Changes in: | ||||
Decreased wholesale sales |
| (11,578 | ) | |
Increased local maintenance |
| (3,703 | ) | |
Increased pensions and benefits |
| (1,342 | ) | |
Increased Palo Verde expense |
| (909 | ) | |
Increased regulatory expense |
| (843 | ) | |
Increased outside services |
| (666 | ) | |
Increased insurance costs |
| (625 | ) | |
Increased economy sales margins |
| 6,633 |
| |
Loss on extinguishment of debt |
| 3,310 |
| |
Other |
| (451 | ) | |
March 31, 2003 | $ | 36,264 |
| |
EBITDA should not be considered an alternative to net income as an indicator of operating performance. Additionally, EBITDA should not be considered an alternative to cash flows from operating activities as a measure of liquidity.
Conference Call
A conference call to discuss first quarter 2003 earnings and earnings guidance is scheduled for 4 p.m. Eastern Time April 29, 2003. The dial-in number is 888-928-9122 with a passcode of 2003. A replay will run through May 14, 2003. The dial-in number is 888-568-0029, and a passcode is not required for the replay. The conference call will be webcast live on EE’s website found at http://www.epelectric.com and streetevents.com. A replay of the webcast will be available shortly after the call.
Safe Harbor
This news release includes statements that may constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. This information may involve risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, increased prices for fuel and purchased power, the costs associated with unexpected local plant maintenance, the replacement of Palo Verde steam generators, the costs of unscheduled outages, the expenses associated with regulatory proceedings and other factors detailed by EE in its public filings with the Securities and Exchange Commission.
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El Paso Electric · P.O. Box 982 · El Paso, Texas 79960
El Paso Electric Company’s consolidated results of operations for the three months ended March 31, 2003 and 2002 and consolidated pro forma results of operations for the three months ended March 31, 2002 which reflect the application of SFAS No. 143 on a retroactive basis are summarized as follows (In thousands except for share data):
Three Months Ended March 31, | ||||||||||||
2003 | 2002 | Pro forma 2002 | ||||||||||
Electric utility operating revenues, net of energy expenses | $ | 102,203 |
| $ | 105,115 |
| $ | 105,115 |
| |||
Energy services operating income (loss) |
| (11 | ) |
| (129 | ) |
| (129 | ) | |||
Other electric utility operating expenses |
| 86,658 |
|
| 77,919 |
|
| 78,097 |
| |||
Other income (deductions) |
| (632 | ) |
| (3,195 | ) |
| (3,195 | ) | |||
Interest charges |
| 11,879 |
|
| 14,958 |
|
| 12,894 |
| |||
Income tax expense |
| 907 |
|
| 3,063 |
|
| 3,793 |
| |||
Income before cumulative effect |
| 2,116 |
|
| 5,851 |
|
| 7,007 |
| |||
Cumulative effect of a change in accounting principle (1) |
| 39,635 |
|
| — |
|
| — |
| |||
Net income | $ | 41,751 |
| $ | 5,851 |
| $ | 7,007 |
| |||
Basic earnings per share: | ||||||||||||
Income before cumulative effect | $ | 0.04 |
| $ | 0.12 |
| $ | 0.14 |
| |||
Cumulative effect of a change in accounting principle, net |
| 0.81 |
|
| — |
|
| — |
| |||
Net income | $ | 0.85 |
| $ | 0.12 |
| $ | 0.14 |
| |||
Weighted average number of common shares outstanding |
| 49,306,844 |
|
| 49,996,059 |
|
| 49,996,059 |
| |||
Diluted earnings per share: | ||||||||||||
Income before cumulative effect | $ | 0.04 |
| $ | 0.12 |
| $ | 0.14 |
| |||
Cumulative effect of a change in accounting principle, net |
| 0.80 |
|
| — |
|
| — |
| |||
Net income | $ | 0.84 |
| $ | 0.12 |
| $ | 0.14 |
| |||
Weighted average number of common shares and common share equivalents outstanding |
| 49,620,276 |
|
| 50,631,542 |
|
| 50,631,542 |
| |||
Three Months Ended March 31, | ||||||||||||
2003 | 2002 | Pro forma 2002 | ||||||||||
Reconciliation of EBITDA to Net Income: | ||||||||||||
EBITDA | $ | 36,264 |
| $ | 46,438 |
| $ | 45,346 |
| |||
Less: | ||||||||||||
Depreciation and amortization |
| 21,362 |
|
| 22,566 |
|
| 21,652 |
| |||
Net interest expense |
| 11,879 |
|
| 14,958 |
|
| 12,894 |
| |||
Income taxes |
| 907 |
|
| 3,063 |
|
| 3,793 |
| |||
Add: | ||||||||||||
Cumulative effect of a change in accounting principle (1) |
| 39,635 |
|
| — |
|
| — |
| |||
Net Income | $ | 41,751 |
| $ | 5,851 |
| $ | 7,007 |
| |||
| (1) | Net of income tax expense of approximately $25.0 million. |
Page 3 of 8
El Paso Electric · P.O. Box 982 · El Paso, Texas 79960
El Paso Electric Company’s consolidated results of operations for the twelve months ended March 31, 2003 and 2002 are summarized as follows (In thousands except for share data):
Twelve Months Ended March 31, | ||||||||
2003 | 2002 | |||||||
Electric utility operating revenues, net of energy expenses | $ | 452,377 |
| $ | 463,277 |
| ||
Energy services operating income (loss) |
| (3,577 | ) |
| (480 | ) | ||
FERC settlements |
| 15,500 |
|
| — |
| ||
Other electric utility operating expenses |
| 334,225 |
|
| 315,884 |
| ||
Other income (deductions) |
| (4,032 | ) |
| (6,213 | ) | ||
Interest charges |
| 55,275 |
|
| 63,517 |
| ||
Income tax expense |
| 14,535 |
|
| 26,271 |
| ||
Income before cumulative effect |
| 25,233 |
|
| 50,912 |
| ||
Cumulative effect of a change in accounting principle (1) |
| 39,635 |
|
| — |
| ||
Net income | $ | 64,868 |
| $ | 50,912 |
| ||
Basic earnings per share: | ||||||||
Income before cumulative effect | $ | 0.51 |
| $ | 1.01 |
| ||
Cumulative effect of a change in accounting principle, net |
| 0.80 |
|
| — |
| ||
Net income | $ | 1.31 |
| $ | 1.01 |
| ||
Weighted average number of common shares outstanding |
| 49,692,437 |
|
| 50,605,241 |
| ||
Diluted earnings per share: | ||||||||
Income before cumulative effect | $ | 0.50 |
| $ | 0.99 |
| ||
Cumulative effect of a change in accounting principle, net |
| 0.79 |
|
| — |
| ||
Net income | $ | 1.29 |
| $ | 0.99 |
| ||
Weighted average number of common shares and common share equivalents outstanding |
| 50,129,975 |
|
| 51,422,028 |
| ||
Twelve Months Ended March 31, | ||||||||
2003 | 2002 | |||||||
Reconciliation of EBITDA to Net Income: | ||||||||
EBITDA | $ | 183,421 |
| $ | 230,576 |
| ||
Less: | ||||||||
Depreciation and amortization |
| 88,378 |
|
| 89,876 |
| ||
Net interest expense |
| 55,275 |
|
| 63,517 |
| ||
Income taxes |
| 14,535 |
|
| 26,271 |
| ||
Add: | ||||||||
Cumulative effect of a change in accounting principle (1) |
| 39,635 |
|
| — |
| ||
Net Income | $ | 64,868 |
| $ | 50,912 |
| ||
| (1) | Net of income tax expense of approximately $25.0 million. |
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El Paso Electric · P.O. Box 982 · El Paso, Texas 79960
El Paso Electric Company’s pro forma consolidated results of operations which reflects the application of SFAS No 143 on a retroactive basis for the twelve months ended March 31, 2003 and 2002 are summarized as follows (In thousands except for share data):
Twelve Months Ended March 31, | ||||||||
Pro forma 2003 | Pro forma 2002 | |||||||
Electric utility operating revenues, net of energy expenses | $ | 452,377 |
| $ | 463,277 |
| ||
Energy services operating income (loss) |
| (3,577 | ) |
| (480 | ) | ||
FERC settlements |
| 15,500 |
|
| — |
| ||
Other electric utility operating expenses |
| 334,761 |
|
| 316,367 |
| ||
Other income (deductions) |
| (4,032 | ) |
| (6,213 | ) | ||
Interest charges |
| 49,082 |
|
| 55,686 |
| ||
Income tax expense |
| 16,725 |
|
| 29,115 |
| ||
Net income | $ | 28,700 |
| $ | 55,416 |
| ||
Basic earnings per share | $ | 0.58 |
| $ | 1.10 |
| ||
Weighted average number of common shares outstanding |
| 49,692,437 |
|
| 50,605,241 |
| ||
Diluted earnings per share | $ | 0.57 |
| $ | 1.08 |
| ||
Weighted average number of common shares and common share equivalents outstanding |
| 50,129,975 |
|
| 51,422,028 |
| ||
Twelve Months Ended March 31, | ||||||||
Pro forma 2003 | Pro forma 2002 | |||||||
Reconciliation of EBITDA to Net Income: | ||||||||
EBITDA | $ | 180,144 |
| $ | 226,491 |
| ||
Less: | ||||||||
Depreciation and amortization |
| 85,637 |
|
| 86,274 |
| ||
Net interest expense |
| 49,082 |
|
| 55,686 |
| ||
Income taxes |
| 16,725 |
|
| 29,115 |
| ||
Net Income | $ | 28,700 |
| $ | 55,416 |
| ||
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El Paso Electric · P.O. Box 982 · El Paso, Texas 79960
Three Months Ended March 31, 2003 and 2002 (In thousands):
2003 | 2002 | Increase (Decrease) | ||||||||
Electric kWh sales: | ||||||||||
Retail: | ||||||||||
Residential |
| 431,202 |
| 432,657 |
| (0.3 | %) | |||
Commercial and industrial, small |
| 437,563 |
| 431,129 |
| 1.5 | % | |||
Commercial and industrial, large |
| 264,741 |
| 261,992 |
| 1.0 | % | |||
Sales to public authorities |
| 257,505 |
| 261,409 |
| (1.5 | %) | |||
Wholesale: | ||||||||||
Sales for resale |
| 9,893 |
| 348,485 |
| (97.2 | %)(1) | |||
Economy sales |
| 615,688 |
| 113,166 |
| 444.1 | % (2) | |||
Total |
| 2,016,592 |
| 1,848,838 |
| 9.1 | % | |||
Electric utility operating revenues: | ||||||||||
Base revenues | ||||||||||
Retail: | ||||||||||
Residential | $ | 37,383 | $ | 37,803 |
| (1.1 | %) | |||
Commercial and industrial, small |
| 35,705 |
| 35,097 |
| 1.7 | % | |||
Commercial and industrial, large |
| 9,886 |
| 9,841 |
| 0.5 | % | |||
Sales to public authorities |
| 15,889 |
| 15,725 |
| 1.0 | % | |||
Wholesale: | ||||||||||
Sales for resale |
| 390 |
| 11,968 |
| (96.7 | %)(1) | |||
Total base revenues |
| 99,253 |
| 110,434 |
| (10.1 | %) | |||
Fuel revenues |
| 21,497 |
| 32,477 |
| (33.8 | %)(3) | |||
Economy sales |
| 25,031 |
| 2,773 |
| 802.7 | % (2) | |||
Other (4) |
| 1,549 |
| 1,923 |
| (19.4 | %) | |||
Total electric utility operating revenues | $ | 147,330 | $ | 147,607 |
| (0.2 | %) | |||
Capital Expenditures | $ | 12,767 | $ | 15,702 |
| |||||
Cash Interest Payments | $ | 14,260 | $ | 16,427 |
| |||||
Depreciation and Amortization | $ | 21,362 | $ | 22,566 | (5) | |||||
EBITDA | $ | 36,264 | $ | 46,438 | (6) | |||||
| (1) | Primarily due to the expiration of wholesale power contracts with IID on April 30, 2002 and TNP on December 31, 2002 |
| (2) | Primarily due to increased available power as a result of the expiration of the wholesale contracts mentioned above and a more robust market. |
| (3) | Primarily due to the expiration of the wholesale contracts with IID and TNP and decreased energy expenses passed through to Texas customers. |
| (4) | Represents revenues with no related kWh sales. |
| (5) | Pro forma depreciation and amortization would be $21,652 assuming SFAS No. 143 had been applied on a retroactive basis. |
| (6) | Pro forma EBITDA would be $45,346 assuming SFAS No. 143 had been applied on a retroactive basis. |
Page 6 of 8
El Paso Electric · P.O. Box 982 · El Paso, Texas 79960
Twelve Months Ended March 31, 2003 and 2002 (In thousands):
2003 | 2002 | Increase (Decrease) | |||||||
Electric kWh sales: | |||||||||
Retail: | |||||||||
Residential |
| 1,869,476 |
| 1,798,050 | 4.0 | % | |||
Commercial and industrial, small |
| 2,083,192 |
| 2,049,707 | 1.6 | % | |||
Commercial and industrial, large |
| 1,164,564 |
| 1,134,530 | 2.6 | % | |||
Sales to public authorities |
| 1,208,276 |
| 1,180,725 | 2.3 | % | |||
Wholesale: | |||||||||
Sales for resale |
| 647,541 |
| 1,486,448 | (56.4 | %)(1) | |||
Economy sales |
| 1,985,987 |
| 688,121 | 188.6 | %(2) | |||
Total | �� |
| 8,959,036 |
| 8,337,581 | 7.5 | % | ||
Electric utility operating revenues: | |||||||||
Base revenues | |||||||||
Retail: | |||||||||
Residential | $ | 165,899 | $ | 159,868 | 3.8 | % | |||
Commercial and industrial, small |
| 164,161 |
| 160,929 | 2.0 | % | |||
Commercial and industrial, large |
| 43,465 |
| 42,753 | 1.7 | % | |||
Sales to public authorities |
| 70,966 |
| 69,883 | 1.5 | % | |||
Wholesale: | |||||||||
Sales for resale |
| 20,648 |
| 55,523 | (62.8 | %)(1) | |||
Total base revenues |
| 465,139 |
| 488,956 | (4.9 | %) | |||
Fuel revenues |
| 147,671 |
| 165,327 | (10.7 | %)(3) | |||
Economy sales |
| 65,914 |
| 47,723 | 38.1 | %(2) | |||
Other (4) |
| 6,526 |
| 8,735 | (25.3 | %) | |||
Total electric utility operating revenues | $ | 685,250 | $ | 710,741 | (3.6 | %) | |||
Capital Expenditures | $ | 62,130 | $ | 68,649 | |||||
Cash Interest Payments | $ | 53,618 | $ | 62,420 | |||||
Depreciation and Amortization (5) | $ | 88,378 | $ | 89,876 | |||||
EBITDA (6) | $ | 183,421 | $ | 230,576 | |||||
| (1) | Primarily due to the expiration of wholesale power contracts with IID on April 30, 2002 and TNP on December 31, 2002. |
| (2) | Primarily due to increased available power as a result of the expiration of the wholesale contracts mentioned above and a more robust market. |
| (3) | Primarily due to the expiration of the wholesale contracts with IID and TNP and decreased energy expenses passed through to Texas customers. |
| (4) | Represents revenues with no related kWh sales. |
| (5) | Pro forma depreciation and amortization would be $85,637 and $86,274, respectively, assuming SFAS No. 143 had been applied on a retroactive basis |
| (6) | Pro forma EBITDA would be $180,144 and $226,491, respectively, assuming SFAS No. 143 had been applied on a retroactive basis. |
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El Paso Electric · P.O. Box 982 · El Paso, Texas 79960
At March 31, 2003 and 2002 (In thousands):
2003 | 2002 | |||||
Cash and Temporary Investments | $ | 44,300 | $ | 24,903 | ||
Common Stock Equity | $ | 493,541 | $ | 457,606 | ||
Long-term Debt, Net of Current Portion |
| 588,621 |
| 518,537 | ||
Financing Obligations, Net of Current Portion |
| 23,377 |
| 26,698 | ||
Total Capitalization | $ | 1,105,539 | $ | 1,002,841 | ||
Current Portion of Long-Term Debt and Financing Obligations | $ | 21,833 | $ | 132,588 | ||
Book Value Per Common Share | $ | 10.04 | $ | 9.08 | ||
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El Paso Electric · P.O. Box 982 · El Paso, Texas 79960