Exhibit 99.01
El Paso Electric
NEWS RELEASE
| For Immediate Release | Contact: | Investor | ||
| Date: July 27, 2004 | Media | Relations: | ||
| Teresa Souza | Steve Busser | |||
| 915/543-5823 | 915/543-5983 | |||
| Rachelle Williams | ||||
| 915/543-2257 |
El Paso Electric Announces Second Quarter Financial Results
El Paso Electric (NYSE: EE) today reported net income for the quarter ended June 30, 2004, of $7.8 million, or $0.16 basic and diluted income per share. Net income for the same period last year was $5.0 million, or $0.10 basic and diluted earnings per share.
The increase in earnings for the quarter ended June 30, 2004, when compared to the quarter ended June 30, 2003, resulted primarily from decreased non-Palo Verde maintenance expense, increased retail sales, and decreased Palo Verde operation and maintenance expenses. These increases in earnings were partially offset by the loss on extinguishment of debt and increased depreciation and amortization expenses.
“Continued efforts to contain our costs and robust sales contributed significantly to our results for the second quarter,” said Gary Hedrick, El Paso Electric President and CEO. “We will continue our cost-containment efforts as well as our deleveraging efforts which we believe contributed to Moody’s recently placing us on credit watch – positive.”
Year to Date
Net income for the six months ended June 30, 2004, was $10.8 million, or $0.23 and $0.22 basic and diluted earnings per share, respectively, compared to net income before the cumulative effect of accounting change of $7.1 million, or $0.15 basic and diluted earnings per share for the same period a year ago. Including the cumulative effect of accounting change of $39.6 million (net of related income taxes) recorded in the six months ended June 30, 2003, basic and diluted earnings per share were $0.95. The cumulative effect of accounting change resulted from EE’s adoption of SFAS No. 143 on January 1, 2003. The increase in earnings for the six months ended June 30, 2004, when compared to the same period a year ago prior to the application of SFAS No. 143, resulted primarily from decreased non-Palo Verde maintenance expense and increased retail sales. These increases in earnings were partially offset by the loss on extinguishment of debt, increased depreciation and amortization expense, and increased pension and benefits expenses.
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El Paso ElectricŸ P.O. Box 982Ÿ El Paso, Texas 79960
Stock and Debt Repurchases
During the quarter, EE repurchased approximately 50,000 shares of common stock in the open market in accordance with the previously approved stock repurchase programs. Since the inception of the stock repurchase programs in 1999, EE has repurchased 15,050,000 shares in total at an aggregate cost of $171.8 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 $575.9 million of first mortgage bonds with internally generated cash since inception of its deleveraging program in 1996. During the second quarter of 2004, EE repurchased $11.1 million of first mortgage bonds. Common stock equity as a percentage of capitalization, including current portion of long-term debt and financing obligations, was 46% as of June 30, 2004.
EBITDA
The change in earnings before interest, income taxes, depreciation and amortization, and cumulative effect of accounting change (“EBITDA”) for the quarter and six months ended June 30, 2004, compared to the same periods in 2003, are as follows (in thousands):
| Quarter Ended | Six Months Ended | |||||||
June 30, 2003 | $ | 41,255 | $ | 77,519 | ||||
Changes in: | ||||||||
Decreased non-Palo Verde maintenance | 3,896 | 9,556 | ||||||
Increased retail sales | 2,333 | 6,590 | ||||||
Decreased Palo Verde expenses | 1,224 | 669 | ||||||
Increased (decreased) economy margins and/or sales | 358 | (1,331 | ) | |||||
Loss on extinguishment of debt | (1,731 | ) | (3,838 | ) | ||||
Increased pension and benefits expenses | (347 | ) | (1,305 | ) | ||||
Other | 518 | (1,089 | ) | |||||
June 30, 2004 | $ | 47,506 | $ | 86,771 | ||||
Management and some members of the investment community utilize EBITDA to measure financial performance on an ongoing basis. EBITDA is traditionally defined as earnings before interest, taxes, depreciation and amortization. As EBITDA is intended to be a measure of a firm’s operating cash flow, an adjustment was made to remove the effects of the 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 2004 earnings and earnings guidance is scheduled for 4 p.m. Eastern Time, Tuesday, July 27, 2004. The dial-in number is 888-843-6162 with a passcode of 2004. The conference leader will be Terry Bassham, Chief Financial and Administrative Officer of EE. A replay will run through August 10, 2004. The dial-in number is 888-568-0541, and a passcode is not required for the replay. 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.
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El Paso ElectricŸ P.O. Box 982Ÿ El Paso, Texas 79960
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: (i) increased prices for fuel and purchased power and the possibility that regulators may not permit EE to pass through all such increased costs to customers; (ii) determinations by regulators that may adversely affect EE’s ability to recover previously incurred fuel costs in rates; (iii) fluctuations in economy margins due to uncertainty in the economy power market; (iv) unanticipated increased costs associated with scheduled and unscheduled outages; (v) the cost of replacing steam generators for Palo Verde Units 1 and 3 and other costs at Palo Verde; (vi) the costs of legal defense and possible judgments which may accrue as the result of ongoing litigation arising out of the FERC investigation or any other regulatory proceeding; (vii) deregulation of the electric utility industry and (viii) other factors detailed by EE in its public filings with the Securities and Exchange Commission. EE’s filings are available from the Securities and Exchange Commission or may be obtained through EE’s website,www.epelectric.com. Any such forward-looking statement is qualified by reference to these risks and factors. EE cautions that these risks and factors are not exclusive. EE does not undertake to update any forward-looking statement that may be made from time to time by or on behalf of EE except as required by law.
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El Paso ElectricŸ P.O. Box 982Ÿ El Paso, Texas 79960
El Paso Electric Company’s consolidated results of operations for the quarter ended June 30, 2004 and 2003,
are summarized as follows (In thousands except for share data):
| Quarter Ended June 30, | ||||||||
| 2004 | 2003 | |||||||
Operating revenues, net of energy expenses | $ | 112,660 | $ | 110,742 | ||||
Other operating expenses | 86,203 | 91,447 | ||||||
Other income (deductions) | (2,078 | ) | 225 | |||||
Interest charges | 11,624 | 11,536 | ||||||
Income tax expense | 4,982 | 2,989 | ||||||
Net income | $ | 7,773 | $ | 4,995 | ||||
Basic earnings per share | $ | 0.16 | $ | 0.10 | ||||
Weighted average number of shares outstanding | 47,500,257 | 48,659,155 | ||||||
Diluted earnings per share | $ | 0.16 | $ | 0.10 | ||||
Weighted average number of shares and dilutive potential shares outstanding | 47,966,465 | 49,037,673 | ||||||
| Quarter Ended June 30, | ||||||||
| 2004 | 2003 | |||||||
Reconciliation of EBITDA to Cash Flow from Operations: | ||||||||
EBITDA | $ | 47,506 | $ | 41,255 | ||||
Interest expense | (11,624 | ) | (11,536 | ) | ||||
Income tax expense | (4,982 | ) | (2,989 | ) | ||||
Other non-cash expenses | 6,209 | 5,984 | ||||||
Change in: | ||||||||
Deferred income taxes | 2,422 | (1,760 | ) | |||||
Current assets | (29,642 | ) | (10,490 | ) | ||||
Current payables and accrued expenses | 4,766 | 4,944 | ||||||
Other | 2,873 | 2,199 | ||||||
Cash Flow from Operating Activities | $ | 17,528 | $ | 27,607 | ||||
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El Paso Electric Company’s consolidated results of operations for the six months ended June 30, 2004 and
and 2003, are summarized as follows (In thousands except for share data):
| Six Months Ended June 30, | ||||||||
| 2004 | 2003 | |||||||
Operating revenues, net of energy expenses | $ | 216,611 | $ | 213,101 | ||||
Other operating expenses | 171,214 | 178,272 | ||||||
Other income (deductions) | (4,812 | ) | (407 | ) | ||||
Interest charges | 23,675 | 23,415 | ||||||
Income tax expense | 6,150 | 3,896 | ||||||
Income before cumulative effect | 10,760 | 7,111 | ||||||
Cumulative effect of accounting change, net (1) | — | 39,635 | ||||||
Net income | $ | 10,760 | $ | 46,746 | ||||
Basic earnings per share: | ||||||||
Income before cumulative effect | $ | 0.23 | $ | 0.15 | ||||
Cumulative effect of accounting change, net | — | 0.80 | ||||||
Net income | $ | 0.23 | $ | 0.95 | ||||
Weighted average number of shares outstanding | 47,475,778 | 48,981,211 | ||||||
Diluted earnings per share: | ||||||||
Income before cumulative effect | $ | 0.22 | $ | 0.15 | ||||
Cumulative effect of accounting change, net | — | 0.80 | ||||||
Net income | $ | 0.22 | $ | 0.95 | ||||
Weighted average number of shares and dilutive potential shares outstanding | 47,933,383 | 49,327,186 | ||||||
| Six Months Ended June 30, | ||||||||
| 2004 | 2003 | |||||||
Reconciliation of EBITDA to Cash Flow from Operations: | ||||||||
EBITDA | $ | 86,771 | $ | 77,519 | ||||
Interest expense | (23,675 | ) | (23,415 | ) | ||||
Income tax expense | (6,150 | ) | (3,896 | ) | ||||
Other non-cash expenses | 12,649 | 12,399 | ||||||
Change in: | ||||||||
Deferred income taxes | (991 | ) | (2,901 | ) | ||||
Current assets | (16,760 | ) | 2,605 | |||||
Current payables and accrued expenses | 7,275 | (1,408 | ) | |||||
Other | 8,492 | 4,258 | ||||||
Cash Flow from Operating Activities | $ | 67,611 | $ | 65,161 | ||||
| (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, 2004 and 2003, and consolidated pro forma results of operations for the twelve months ended June 30, 2003, which reflect the application of SFAS No. 143 on a retroactive basis are summarized as follows (In thousands except for share data):
| Twelve Months Ended June 30, | ||||||||||||
2004 | 2003 | Pro forma 2003 | ||||||||||
Operating revenues, net of energy expenses | $ | 446,913 | $ | 450,352 | $ | 450,352 | ||||||
Impairment loss on CIS project | 17,576 | — | — | |||||||||
FERC settlements | — | 15,500 | 15,500 | |||||||||
Other operating expenses | 338,554 | 351,931 | 352,288 | |||||||||
Other income (deductions) | (4,062 | ) | (2,835 | ) | (2,835 | ) | ||||||
Interest charges | 46,783 | 52,467 | 48,339 | |||||||||
Income tax expense | 15,673 | 9,710 | 11,169 | |||||||||
Income before cumulative effect | 24,265 | 17,909 | 20,221 | |||||||||
Cumulative effect of accounting change, net (1) | — | 39,635 | — | |||||||||
Net income | $ | 24,265 | $ | 57,544 | $ | 20,221 | ||||||
Basic earnings per share: | ||||||||||||
Income before cumulative effect | $ | 0.51 | $ | 0.36 | $ | 0.41 | ||||||
Cumulative effect of accounting change, net | — | 0.81 | — | |||||||||
Net income | $ | 0.51 | $ | 1.17 | $ | 0.41 | ||||||
Weighted average number of shares outstanding | 47,677,134 | 49,335,156 | 49,335,156 | |||||||||
Diluted earnings per share: | ||||||||||||
Income before cumulative effect | $ | 0.50 | $ | 0.36 | $ | 0.41 | ||||||
Cumulative effect of accounting change, net | — | 0.80 | — | |||||||||
Net income | $ | 0.50 | $ | 1.16 | $ | 0.41 | ||||||
Weighted average number of shares and dilutive potential shares outstanding | 48,123,497 | 49,727,209 | 49,727,209 | |||||||||
| Twelve Months Ended June 30, | ||||||||||||
2004 | 2003 | Pro forma 2003 | ||||||||||
Reconciliation of EBITDA to Cash Flow from Operations: | ||||||||||||
EBITDA | $ | 194,527 | (2) | $ | 167,756 | $ | 165,571 | |||||
Interest expense | (46,783 | ) | (52,467 | ) | (48,339 | ) | ||||||
Income tax expense | (15,673 | ) | (9,710 | ) | (11,169 | ) | ||||||
Other non-cash expenses | 24,368 | 27,231 | 25,288 | |||||||||
Change in: | ||||||||||||
Deferred income taxes | 12,159 | (4,402 | ) | (2,943 | ) | |||||||
Current assets | (22,200 | ) | 8,983 | 8,983 | ||||||||
Current payables and accrued expenses | (16,213 | ) | 19,157 | 19,157 | ||||||||
Other | 7,279 | 7,657 | 7,657 | |||||||||
Cash Flow from Operating Activities | $ | 137,464 | $ | 164,205 | $ | 164,205 | ||||||
| (1) | Net of income tax expense of approximately $25.0 million. |
| (2) | EBITDA is defined as net income before interest, income taxes, depreciation and amortization, impairment loss, and cumulative effect of accounting change. |
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Quarter Ended June 30, 2004 and 2003 (In thousands):
| 2004 | 2003 | Increase(Decrease) | |||||||
kWh sales: | |||||||||
Retail: | |||||||||
Residential | 468,486 | 447,248 | 4.7 | % | |||||
Commercial and industrial, small | 556,515 | 535,141 | 4.0 | % | |||||
Commercial and industrial, large | 315,445 | 301,785 | 4.5 | % | |||||
Sales to public authorities | 323,768 | 315,943 | 2.5 | % | |||||
Total retail sales | 1,664,214 | 1,600,117 | 4.0 | % | |||||
Wholesale: | |||||||||
Sales for resale | 13,486 | 29,313 | (54.0 | )% (1) | |||||
Economy sales | 431,354 | 417,896 | 3.2 | % | |||||
Total wholesale sales | 444,840 | 447,209 | (0.5 | )% | |||||
Total kWh sales | 2,109,054 | 2,047,326 | 3.0 | % | |||||
Operating revenues: | |||||||||
Base revenues: | |||||||||
Retail: | |||||||||
Residential | $ | 41,981 | $ | 40,437 | 3.8 | % | |||
Commercial and industrial, small | 43,346 | 42,418 | 2.2 | % | |||||
Commercial and industrial, large | 11,013 | 11,023 | (0.1 | )% | |||||
Sales to public authorities | 19,045 | 19,174 | (0.7 | )% | |||||
Total retail base revenues | 115,385 | 113,052 | 2.1 | % | |||||
Wholesale: | |||||||||
Sales for resale | 520 | 1,557 | (66.6 | )% (1) | |||||
Total base revenues | 115,905 | 114,609 | 1.1 | % | |||||
Fuel revenues | 45,070 | 30,470 | 47.9 | % (2) | |||||
Economy sales | 18,527 | 15,639 | 18.5 | % (3) | |||||
Other | 2,704 | 1,780 | 51.9 | % (4) (5) | |||||
Total operating revenues | $ | 182,206 | $ | 162,498 | 12.1 | % | |||
Capital Expenditures | $ | 14,354 | $ | 19,968 | |||||
Cash Interest Payments | $ | 12,311 | $ | 12,399 | |||||
Depreciation and Amortization | $ | 23,127 | $ | 21,735 | |||||
EBITDA | $ | 47,506 | $ | 41,255 | |||||
| (1) | Primarily due to a 2003 CFE wholesale power contract with no comparable contract in 2004. |
| (2) | Primarily due to an increase in recoverable fuel expenses, as a result of an increase in the price and volume of natural gas burned and an increase in purchased power costs. |
| (3) | Primarily due to higher prices in the economy market. |
| (4) | Represents revenues with no related kWh sales. |
| (5) | Primarily due to increased transmission revenues. |
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Six Months Ended June 30, 2004 and 2003 (In thousands):
| 2004 | 2003 | Increase (Decrease) | |||||||
kWh sales: | |||||||||
Retail: | |||||||||
Residential | 936,803 | 878,450 | 6.6 | % | |||||
Commercial and industrial, small | 1,011,363 | 972,704 | 4.0 | % | |||||
Commercial and industrial, large | 618,835 | 566,526 | 9.2 | % | |||||
Sales to public authorities | 602,672 | 573,448 | 5.1 | % | |||||
Total retail sales | 3,169,673 | 2,991,128 | 6.0 | % | |||||
Wholesale: | |||||||||
Sales for resale | 22,753 | 39,206 | (42.0 | )% (1) | |||||
Economy sales | 917,974 | 1,033,584 | (11.2 | )% (2) | |||||
Total wholesale sales | 940,727 | 1,072,790 | (12.3 | )% | |||||
Total kWh sales | 4,110,400 | 4,063,918 | 1.1 | % | |||||
Operating revenues: | |||||||||
Base revenues: | |||||||||
Retail: | |||||||||
Residential | $ | 82,152 | $ | 77,819 | 5.6 | % | |||
Commercial and industrial, small | 79,447 | 78,123 | 1.7 | % | |||||
Commercial and industrial, large | 21,303 | 20,910 | 1.9 | % | |||||
Sales to public authorities | 35,603 | 35,063 | 1.5 | % | |||||
Total retail base revenues | 218,505 | 211,915 | 3.1 | % | |||||
Wholesale: | |||||||||
Sales for resale | 912 | 1,947 | (53.2 | )% (1) | |||||
Total base revenues | 219,417 | 213,862 | 2.6 | % | |||||
Fuel revenues | 76,344 | 51,967 | 46.9 | % (3) | |||||
Economy sales | 37,491 | 40,670 | (7.8 | )% (2) | |||||
Other | 4,806 | 3,485 | 37.9 | % (4) (5) | |||||
Total operating revenues | $ | 338,058 | $ | 309,984 | 9.1 | % | |||
Capital Expenditures | $ | 30,010 | $ | 32,735 | |||||
Cash Interest Payments | $ | 25,001 | $ | 26,659 | |||||
Depreciation and Amortization | $ | 46,186 | $ | 43,097 | |||||
EBITDA | $ | 86,771 | $ | 77,519 | |||||
| (1) | Primarily due to a 2003 CFE wholesale power contract with no comparable contract in 2004. |
| (2) | Primarily due to decreased available power as a result of outages at Palo Verde and increased retail sales. |
| (3) | Primarily due to an increase in recoverable fuel expenses, as a result of an increase in the volume and price of natural gas burned and an increase in purchased power costs. |
| (4) | Represents revenues with no related kWh sales. |
| (5) | Primarily due to increased transmission revenues. |
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Twelve Months Ended June 30, 2004 and 2003 (In thousands):
| 2004 | 2003 | Increase (Decrease) | ||||||||
kWh sales: | ||||||||||
Retail: | ||||||||||
Residential | 1,990,524 | 1,878,726 | 6.0 | % | ||||||
Commercial and industrial, small | 2,135,519 | 2,063,254 | 3.5 | % | ||||||
Commercial and industrial, large | 1,249,374 | 1,158,565 | 7.8 | % | ||||||
Sales to public authorities | 1,253,573 | 1,203,875 | 4.1 | % | ||||||
Total retail sales | 6,628,990 | 6,304,420 | 5.1 | % | ||||||
Wholesale: | ||||||||||
Sales for resale | 51,301 | 419,427 | (87.8 | )% (1) | ||||||
Economy sales | 1,805,272 | 1,904,830 | (5.2 | )% | ||||||
Total wholesale sales | 1,856,573 | 2,324,257 | (20.1 | )% | ||||||
Total kWh sales | 8,485,563 | 8,628,677 | (1.7 | )% | ||||||
Operating revenues: | ||||||||||
Base revenues: | ||||||||||
Retail: | ||||||||||
Residential | $ | 175,792 | $ | 166,970 | 5.3 | % | ||||
Commercial and industrial, small | 166,758 | 163,456 | 2.0 | % | ||||||
Commercial and industrial, large | 43,687 | 43,304 | 0.9 | % | ||||||
Sales to public authorities | 73,676 | 71,577 | 2.9 | % | ||||||
Total retail base revenues | 459,913 | 445,307 | 3.3 | % | ||||||
Wholesale: | ||||||||||
Sales for resale | 2,188 | 13,501 | (83.8 | )% (1) | ||||||
Total base revenues | 462,101 | 458,808 | 0.7 | % | ||||||
Fuel revenues | 147,138 | 134,022 | 9.8 | % | ||||||
Economy sales | 73,357 | 68,343 | 7.3 | % | ||||||
Other | 9,840 | 8,677 | 13.4 | % (2) (3) | ||||||
Total operating revenues | $ | 692,436 | $ | 669,850 | 3.4 | % | ||||
Capital Expenditures | $ | 74,355 | $ | 65,484 | ||||||
Cash Interest Payments | $ | 49,938 | $ | 53,465 | ||||||
Depreciation and Amortization | $ | 90,230 | $ | 87,670 | (4) | |||||
EBITDA | $ | 194,527 | $ | 167,756 | (5) | |||||
| (1) | Primarily due to the expiration of a wholesale power contract with TNP on December 31, 2002 and a 2003 CFE wholesale power contract with no comparable contract in 2004. |
| (2) | Primarily due to increased transmission revenues partially offset by decreased MiraSol revenues. |
| (3) | Represents revenues with no related kWh sales. |
| (4) | Pro forma depreciation and amortization would be $85,842 in 2003 assuming SFAS No. 143 had been applied on a retroactive basis. |
| (5) | Pro forma EBITDA would be $165,571 in 2003 assuming SFAS No. 143 had been applied on a retroactive basis. |
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At June 30, 2004 and 2003 (In thousands, except number of shares and book value per share):
| 2004 | 2003 | |||||
Cash and Temporary Investments | $ | 26,928 | $ | 32,715 | ||
Common Stock Equity | $ | 509,836 | $ | 490,445 | ||
Long-term Debt, Net of Current Portion | 563,071 | 588,598 | ||||
Financing Obligations, Net of Current Portion | — | 23,116 | ||||
Total Capitalization | $ | 1,072,907 | $ | 1,102,159 | ||
Current Portion of Long-Term Debt and Financing Obligations | $ | 42,003 | $ | 21,872 | ||
Number of Shares | 47,590,751 | 48,179,546 | ||||
Book Value Per Common Share | $ | 10.71 | $ | 10.18 | ||
Number of retail customers | 329 | 320 | ||||
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