EXHIBIT 99.01
El Paso Electric
NEWS RELEASE
For Immediate Release | Contact: | |||
Date: July 28, 2003 | Media | Analyst | ||
| Teresa Souza | Cynthia Gamez | |||
| 915/543-5823 | 915/543-2213 |
El Paso Electric Announces Second Quarter Financial Results
El Paso Electric (NYSE: EE) today reported net income for the quarter ended June 30, 2003, of $5.0 million, or $0.10 basic and diluted earnings per share. Net income for the same period last year was $12.3 million, or $0.25 and $0.24 basic and diluted earnings per share, respectively.
The decrease in earnings for the quarter ended June 30, 2003, when compared to the quarter ended June 30, 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 Palo Verde operations and maintenance expenses. These decreases in earnings were partially offset by reduced interest and depreciation expense resulting from the adoption of SFAS No. 143, “Accounting for Asset Retirement Obligations” on January 1, 2003, and increased margins on economy sales.
“We have seen increased expenses at our local plants and at Palo Verde which were necessary to ensure the availability of those units for our peak season,” said Gary Hedrick, President and CEO. “Although our commercial and industrial sales are down, our residential growth continues to be strong.”
Year to Date
Net income before the cumulative effect of accounting change for the six months ended June 30, 2003, was $7.1 million, or $0.15 basic and diluted earnings per share compared to net income of $18.2 million, or $0.36 basic and diluted earnings per share for the same period a year ago. Net income for the six months ended June 30, 2003, includes a cumulative effect of accounting change, net of related income taxes, in the amount of $39.6 million, or $0.80 basic and diluted earnings per share, related to the adoption of SFAS No. 143 on January 1, 2003. Net income after the cumulative effect of accounting change for the six months ended June 30, 2003, was $46.7 million, or $0.95 basic and diluted earnings per share. The decrease in earnings prior to the consideration of the cumulative effect of accounting change for the six months ended June 30, 2003, when compared to the same period a year ago is primarily attributable to decreased wholesale sales revenue related to
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El Paso Electric • P.O. Box 982 • El Paso, Texas 79960
the expiration of two long-term contracts, increased maintenance expense at local plants, increased Palo Verde operations and maintenance expenses, increased pension and benefits expenses, and increased insurance expenses. These decreases were partially offset by increased sales and margins on economy sales, a loss on extinguishment of debt recorded in the prior year without any corresponding amounts in the current year, and the adoption of SFAS No. 143 which reduced interest and depreciation expense in the current year without any offsetting amounts from the prior year.
During the quarter EE repurchased approximately one 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 14.4 million shares have been repurchased in total at an aggregate cost of $163.5 million, including commissions. EE may continue making purchases of its stock at open market prices and may engage in private transactions, where appropriate.
EE has repurchased or retired $550.5 million of first mortgage bonds with internally generated cash since inception of its deleveraging program in 1996. No first mortgage bonds were repurchased during the second quarter of 2003. Common stock equity as a percentage of capitalization, including current portion of long-term debt and financing obligations, was 44% as of June 30, 2003.
EBITDA
The change in earnings before interest, income taxes, depreciation and amortization, and cumulative effect of accounting change (“EBITDA”) for the three and six months ended June 30, 2003, compared to the same periods in 2002, are as follows (in thousands):
| Three Months Ended | Six Months Ended | |||||||
June 30, 2002 | $ | 56,920 | $ | 103,357 | ||||
Changes in: | ||||||||
Decreased wholesale sales | (7,334 | ) | (18,912 | ) | ||||
Increased local plant maintenance | (3,413 | ) | (7,116 | ) | ||||
Increased Palo Verde expenses | (3,075 | ) | (3,985 | ) | ||||
Increased insurance expenses | (1,567 | ) | (2,193 | ) | ||||
Increased outside services | (1,163 | ) | (1,829 | ) | ||||
Increased pension and benefits expenses | (1,004 | ) | (2,347 | ) | ||||
Increased economy sales and/or margins | 830 | 7,463 | ||||||
Loss on extinguishment of debt | 100 | 3,410 | ||||||
Other | 961 | (329 | ) | |||||
June 30, 2003 | $ | 41,255 | $ | 77,519 | ||||
Management and some members of the investment community utilize EBITDA to measure financial performance on an ongoing basis. EBITDA is defined as net income before interest, income taxes, depreciation and amortization, and cumulative effect of accounting change. This non-GAAP measure should be considered in addition to, not as a substitute for or superior to, net income, consolidated statements of cash flows, or other measures of financial performance prepared in accordance with GAAP.
Conference Call
A conference call to discuss second quarter 2003 earnings and earnings guidance is scheduled for 4 p.m. Eastern Time July 28, 2003. The dial-in number is 877-915-2768 with a passcode of 2003. A replay will run through August 11, 2003. The dial-in number is 800-337-4108, and a passcode is not required for the replay.
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El Paso Electric • P.O. Box 982 • El Paso, Texas 79960
The conference call will be webcast live on EE’s website found athttp://www.epelectric.com andhttp://www.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 June 30, 2003 and 2002, and consolidated pro forma results of operations for the three months ended June 30, 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 June 30, | ||||||||||||
| 2003 | 2002 | Pro forma 2002 | ||||||||||
Electric utility operating revenues, net of energy expenses | $ | 110,557 | $ | 114,786 | $ | 114,786 | ||||||
Energy services operating income (loss) | (98 | ) | (328 | ) | (328 | ) | ||||||
Other electric utility operating expenses | 91,164 | 79,010 | 79,189 | |||||||||
Other income (deductions) | 225 | (971 | ) | (971 | ) | |||||||
Interest charges | 11,536 | 14,344 | 12,280 | |||||||||
Income tax expense | 2,989 | 7,815 | 8,545 | |||||||||
Net income | $ | 4,995 | $ | 12,318 | $ | 13,473 | ||||||
Basic earnings per share | $ | 0.10 | $ | 0.25 | $ | 0.27 | ||||||
Weighted average number of common shares outstanding | 48,659,155 | 50,092,213 | 50,092,213 | |||||||||
Diluted earnings per share | $ | 0.10 | $ | 0.24 | $ | 0.27 | ||||||
Weighted average number of common shares and common share equivalents outstanding | 49,037,673 | 50,652,666 | 50,652,666 | |||||||||
| Three Months Ended June 30, | ||||||||||||
| 2003 | 2002 | Pro forma 2002 | ||||||||||
Reconciliation of EBITDA to Net Income: | ||||||||||||
EBITDA | $ | 41,255 | $ | 56,920 | $ | 55,827 | ||||||
Less: | ||||||||||||
Depreciation and amortization | 21,735 | 22,443 | 21,529 | |||||||||
Net interest expense | 11,536 | 14,344 | 12,280 | |||||||||
Income taxes | 2,989 | 7,815 | 8,545 | |||||||||
Net Income | $ | 4,995 | $ | 12,318 | $ | 13,473 | ||||||
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El Paso Electric Company’s consolidated results of operations for the six months ended June 30, 2003 and 2002, and consolidated pro forma results of operations for the six months ended June 30, 2002, which reflect the application of SFAS No. 143 on a retroactive basis are summarized as follows (In thousands except for share data):
| Six Months Ended June 30, | ||||||||||||
| 2003 | 2002 | Pro forma 2002 | ||||||||||
Electric utility operating revenues, net of energy expenses | $ | 212,760 | $ | 219,901 | $ | 219,901 | ||||||
Energy services operating income (loss) | (109 | ) | (457 | ) | (457 | ) | ||||||
Other electric utility operating expenses | 177,822 | 156,929 | 157,286 | |||||||||
Other income (deductions) | (407 | ) | (4,167 | ) | (4,167 | ) | ||||||
Interest charges | 23,415 | 29,302 | 25,174 | |||||||||
Income tax expense | 3,896 | 10,877 | 12,337 | |||||||||
Income before cumulative effect | 7,111 | 18,169 | 20,480 | |||||||||
Cumulative effect of accounting change, net (1) | 39,635 | — | — | |||||||||
Net income | $ | 46,746 | $ | 18,169 | $ | 20,480 | ||||||
Basic earnings per share: | ||||||||||||
Income before cumulative effect | $ | 0.15 | $ | 0.36 | $ | 0.41 | ||||||
Cumulative effect of accounting change, net | 0.80 | — | — | |||||||||
Net income | $ | 0.95 | $ | 0.36 | $ | 0.41 | ||||||
Weighted average number of common shares | 48,981,211 | 50,044,473 | 50,044,473 | |||||||||
Diluted earnings per share: | ||||||||||||
Income before cumulative effect | $ | 0.15 | $ | 0.36 | $ | 0.40 | ||||||
Cumulative effect of accounting change, net | 0.80 | — | — | |||||||||
Net income | $ | 0.95 | $ | 0.36 | $ | 0.40 | ||||||
Weighted average number of common shares | 49,327,186 | 50,642,442 | 50,642,442 | |||||||||
| Six Months Ended June 30, | ||||||||||||
| 2003 | 2002 | Pro forma 2002 | ||||||||||
Reconciliation of EBITDA to Net Income: | ||||||||||||
EBITDA | $ | 77,519 | $ | 103,357 | $ | 101,172 | ||||||
Less: | ||||||||||||
Depreciation and amortization | 43,097 | 45,009 | 43,181 | |||||||||
Net interest expense | 23,415 | 29,302 | 25,174 | |||||||||
Income taxes | 3,896 | 10,877 | 12,337 | |||||||||
Add: | ||||||||||||
Cumulative effect of accounting change, net (1) | 39,635 | — | — | |||||||||
Net Income | $ | 46,746 | $ | 18,169 | $ | 20,480 | ||||||
| (1) | Net of income tax expense of approximately $25.0 million. |
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El Paso Electric Company’s consolidated results of operations for the twelve months ended June 30, 2003 and 2002, are summarized as follows (In thousands except for share data):
| Twelve Months Ended June 30, | ||||||||
| 2003 | 2002 | |||||||
Electric utility operating revenues, net of energy expenses | $ | 448,147 | $ | 462,679 | ||||
Energy services operating income (loss) | (3,347 | ) | (84 | ) | ||||
FERC settlements | 15,500 | — | ||||||
Other electric utility operating expenses | 346,379 | 316,249 | ||||||
Other income (deductions) | (2,835 | ) | (8,014 | ) | ||||
Interest charges | 52,467 | 61,096 | ||||||
Income tax expense | 9,710 | 26,111 | ||||||
Income before cumulative effect | 17,909 | 51,125 | ||||||
Cumulative effect of accounting change, net (1) | 39,635 | — | ||||||
Net income | $ | 57,544 | $ | 51,125 | ||||
Basic earnings per share: | ||||||||
Income before cumulative effect | $ | 0.36 | $ | 1.02 | ||||
Cumulative effect of accounting change, net | 0.81 | — | ||||||
Net income | $ | 1.17 | $ | 1.02 | ||||
Weighted average number of common shares | 49,335,156 | 50,320,969 | ||||||
Diluted earnings per share: | ||||||||
Income before cumulative effect | $ | 0.36 | $ | 1.00 | ||||
Cumulative effect of accounting change, net | 0.80 | — | ||||||
Net income | $ | 1.16 | $ | 1.00 | ||||
Weighted average number of common shares | 49,727,209 | 51,032,717 | ||||||
| Twelve Months Ended June 30, | ||||||||
| 2003 | 2002 | |||||||
Reconciliation of EBITDA to Net Income: | ||||||||
EBITDA | $ | 167,756 | $ | 228,404 | ||||
Less: | ||||||||
Depreciation and amortization | 87,670 | 90,072 | ||||||
Net interest expense | 52,467 | 61,096 | ||||||
Income taxes | 9,710 | 26,111 | ||||||
Add: | ||||||||
Cumulative effect of accounting change, net (1) | 39,635 | — | ||||||
Net Income | $ | 57,544 | $ | 51,125 | ||||
| (1) | Net of income tax expense of approximately $25.0 million. |
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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 June 30, 2003 and 2002, are summarized as follows (In thousands except for share data):
| Twelve Months Ended June 30, | ||||||||
| Pro forma 2003 | Pro forma 2002 | |||||||
Electric utility operating revenues, net of energy expenses | $ | 448,147 | $ | 462,679 | ||||
Energy services operating income (loss) | (3,347 | ) | (84 | ) | ||||
FERC settlements | 15,500 | — | ||||||
Other electric utility operating expenses | 346,736 | 316,809 | ||||||
Other income (deductions) | (2,835 | ) | (8,014 | ) | ||||
Interest charges | 48,339 | 53,123 | ||||||
Income tax expense | 11,169 | 28,980 | ||||||
Net income | $ | 20,221 | $ | 55,669 | ||||
Basic earnings per share | $ | 0.41 | $ | 1.11 | ||||
Weighted average number of common shares | 49,335,156 | 50,320,969 | ||||||
Diluted earnings per share | $ | 0.41 | $ | 1.09 | ||||
Weighted average number of common shares and common share equivalents outstanding | 49,727,209 | 51,032,717 | ||||||
| Twelve Months Ended June 30, | ||||||||
| Pro forma 2003 | Pro forma 2002 | |||||||
Reconciliation of EBITDA to Net Income: | ||||||||
EBITDA | $ | 165,571 | $ | 224,224 | ||||
Less: | ||||||||
Depreciation and amortization | 85,842 | 86,452 | ||||||
Net interest expense | 48,339 | 53,123 | ||||||
Income taxes | 11,169 | 28,980 | ||||||
Net Income | $ | 20,221 | $ | 55,669 | ||||
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Three Months Ended June 30, 2003 and 2002 (In thousands):
| 2003 | 2002 | Increase (Decrease) | ||||||||
Electric kWh sales: | ||||||||||
Retail: | ||||||||||
Residential | 447,248 | 437,998 | 2.1 | % | ||||||
Commercial and industrial, small | 535,141 | 555,079 | (3.6 | %) | ||||||
Commercial and industrial, large | 301,785 | 307,784 | (1.9 | %) | ||||||
Sales to public authorities | 315,943 | 320,344 | (1.4 | %) | ||||||
Wholesale: | ||||||||||
Sales for resale | 29,313 | 257,428 | (88.6 | %) (1) | ||||||
Economy sales | 417,896 | 499,053 | (16.3 | %) (2) | ||||||
Total | 2,047,326 | 2,377,686 | (13.9 | %) | ||||||
Electric utility operating revenues: | ||||||||||
Base revenues: | ||||||||||
Retail: | ||||||||||
Residential | $ | 40,437 | $ | 39,366 | 2.7 | % | ||||
Commercial and industrial, small | 42,418 | 43,124 | (1.6 | %) | ||||||
Commercial and industrial, large | 11,023 | 11,184 | (1.4 | %) | ||||||
Sales to public authorities | 19,174 | 18,563 | 3.3 | % | ||||||
Wholesale: | ||||||||||
Sales for resale | 1,557 | 8,703 | (82.1 | %) (1) | ||||||
Total base revenues | 114,609 | 120,940 | (5.2 | %) | ||||||
Fuel revenues | 30,470 | 44,119 | (30.9 | %) (3) | ||||||
Economy sales | 15,639 | 13,209 | 18.4 | % (2) | ||||||
Other (4) | 1,595 | 1,649 | (3.3 | %) | ||||||
Total electric utility operating revenues | $ | 162,313 | $ | 179,917 | (9.8 | %) | ||||
Capital Expenditures | $ | 19,968 | $ | 16,614 | ||||||
Cash Interest Payments | $ | 12,399 | $ | 12,552 | ||||||
Depreciation and Amortization | $ | 21,735 | $ | 22,443 | (5) | |||||
EBITDA | $ | 41,255 | $ | 56,920 | (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 decreased available power as a result of maintenance at local plants and Palo Verde. The economic impact of this decrease was offset with higher market prices compared to the same period last year. |
| (3) | Primarily due to decreased energy expenses passed through to Texas customers and the expiration of the wholesale contracts with IID and TNP. |
| (4) | Represents revenues with no related kWh sales. |
| (5) | Pro forma depreciation and amortization would be $21,529 assuming SFAS No. 143 had been applied on a retroactive basis. |
| (6) | Pro forma EBITDA would be $55,827 assuming SFAS No. 143 had been applied on a retroactive basis. |
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Six Months Ended June 30, 2003 and 2002 (In thousands):
| 2003 | 2002 | Increase (Decrease) | ||||||||
Electric kWh sales: | ||||||||||
Retail: | ||||||||||
Residential | 878,450 | 870,655 | 0.9 | % | ||||||
Commercial and industrial, small | 972,704 | 986,208 | (1.4 | %) | ||||||
Commercial and industrial, large | 566,526 | 569,776 | (0.6 | %) | ||||||
Sales to public authorities | 573,448 | 581,753 | (1.4 | %) | ||||||
Wholesale: | ||||||||||
Sales for resale | 39,206 | 605,913 | (93.5 | %) (1) | ||||||
Economy sales | 1,033,584 | 612,219 | 68.8 | % (2) | ||||||
Total | 4,063,918 | 4,226,524 | (3.8 | %) | ||||||
Electric utility operating revenues: | ||||||||||
Base revenues: | ||||||||||
Retail: | ||||||||||
Residential | $ | 77,819 | $ | 77,169 | 0.8 | % | ||||
Commercial and industrial, small | 78,123 | 78,221 | (0.1 | %) | ||||||
Commercial and industrial, large | 20,910 | 21,025 | (0.5 | %) | ||||||
Sales to public authorities | 35,063 | 34,288 | 2.3 | % | ||||||
Wholesale: | ||||||||||
Sales for resale | 1,947 | 20,672 | (90.6 | %) (1) | ||||||
Total base revenues | 213,862 | 231,375 | (7.6 | %) | ||||||
Fuel revenues | 51,967 | 76,595 | (32.2 | %) (3) | ||||||
Economy sales | 40,670 | 15,982 | 154.5 | % (2) | ||||||
Other (4) | 3,144 | 3,572 | (12.0 | %) | ||||||
Total electric utility operating revenues | $ | 309,643 | $ | 327,524 | (5.5 | %) | ||||
Capital Expenditures | $ | 32,735 | $ | 32,316 | ||||||
Cash Interest Payments | $ | 26,659 | $ | 28,979 | ||||||
Depreciation and Amortization | $ | 43,097 | $ | 45,009 | (5) | |||||
EBITDA | $ | 77,519 | $ | 103,357 | (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 $43,181 assuming SFAS No. 143 had been applied on a retroactive basis. |
| (6) | Pro forma EBITDA would be $101,172 assuming SFAS No. 143 had been applied on a retroactive basis. |
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Twelve Months Ended June 30, 2003 and 2002 (In thousands):
| 2003 | 2002 | Increase (Decrease) | |||||||
Electric kWh sales: | |||||||||
Retail: | |||||||||
Residential | 1,878,726 | 1,825,802 | 2.9 | % | |||||
Commercial and industrial, small | 2,063,254 | 2,070,258 | (0.3 | %) | |||||
Commercial and industrial, large | 1,158,565 | 1,164,778 | (0.5 | %) | |||||
Sales to public authorities | 1,203,875 | 1,201,365 | 0.2 | % | |||||
Wholesale: | |||||||||
Sales for resale | 419,427 | 1,360,374 | (69.2 | %) (1) | |||||
Economy sales | 1,904,830 | 913,281 | 108.6 | % (2) | |||||
Total | 8,628,677 | 8,535,858 | 1.1 | % | |||||
Electric utility operating revenues: | |||||||||
Base revenues: | |||||||||
Retail: | |||||||||
Residential | $ | 166,970 | $ | 162,211 | 2.9 | % | |||
Commercial and industrial, small | 163,456 | 162,979 | 0.3 | % | |||||
Commercial and industrial, large | 43,304 | 43,540 | (0.5 | %) | |||||
Sales to public authorities | 71,577 | 70,735 | 1.2 | % | |||||
Wholesale: | |||||||||
Sales for resale | 13,501 | 50,164 | (73.1 | %) (1) | |||||
Total base revenues | 458,808 | 489,629 | (6.3 | %) | |||||
Fuel revenues | 134,022 | 156,354 | (14.3 | %) (3) | |||||
Economy sales | 68,343 | 33,704 | 102.8 | % (2) | |||||
Other (4) | 6,472 | 7,844 | (17.5 | %) | |||||
Total electric utility operating revenues | $ | 667,645 | $ | 687,531 | (2.9 | %) | |||
Capital Expenditures | $ | 65,484 | $ | 67,128 | |||||
Cash Interest Payments | $ | 53,465 | $ | 59,943 | |||||
Depreciation and Amortization (5) | $ | 87,670 | $ | 90,072 | |||||
EBITDA (6) | $ | 167,756 | $ | 228,404 | |||||
| (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 $85,842 and $86,452 in 2003 and 2002, respectively, assuming SFAS No. 143 had been applied on a retroactive basis. |
| (6) | Pro forma EBITDA would be $165,571 and $224,224 in 2003 and 2002, respectively, assuming SFAS No. 143 had been applied on a retroactive basis. |
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At June 30, 2003 and 2002 (In thousands):
| 2003 | 2002 | |||||
Cash and Temporary Investments | $ | 32,715 | $ | 31,818 | ||
Common Stock Equity | $ | 490,445 | $ | 462,594 | ||
Long-term Debt, Net of Current Portion | 588,598 | 588,711 | ||||
Financing Obligations, Net of Current Portion | 23,116 | 27,207 | ||||
Total Capitalization | $ | 1,102,159 | $ | 1,078,512 | ||
Current Portion of Long-Term Debt and Financing Obligations | $ | 21,872 | $ | 60,587 | ||
Book Value Per Common Share | $ | 10.18 | $ | 9.22 | ||
Number of retail customers | 320 | 313 | ||||
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