EXHIBIT 99.01
El Paso Electric
NEWS RELEASE
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| For Immediate Release | | Contact: | | Investor |
Date: April 28, 2005 | | Media | | Relations: |
| | | Teresa Souza 915/543-5823 | | Steve Busser 915/543-5983 Rachelle Williams 915/543-2257 |
El Paso Electric Announces First Quarter Financial Results
El Paso Electric (NYSE: EE) today reported net income for the quarter ended March 31, 2005 of $4.8 million, or $0.10 basic and diluted income per share. Net income for the same period last year was $2.9 million, or $0.06 basic and diluted earnings per share.
Earnings for the quarter ended March 31, 2005 were positively affected by increased economy sales margins in 2005, loss on extinguishment of debt in 2004 with no comparable activity in 2005, decreased taxes other than income taxes in 2005, decreased insurance expenses in 2005, decreased outside services in 2005, and increased investment and interest income in 2005. These increases in earnings were partially offset by decreased retail base revenues in 2005 and increased non-Palo Verde operating and maintenance costs in 2005.
“We are pleased to announce an increase in earnings relative to the first quarter of 2004,” said Gary Hedrick, El Paso Electric Company President and CEO. “Though retail sales were softer than expected they were more than offset by increased economy energy sales, decreased operating expenses, and reduced interest expense.”
Stock and Debt Repurchases
Since the inception of the stock repurchase programs in 1999, EE has repurchased 15.3 million shares in total at an aggregate cost of $175.6 million, including commissions. No common stock was repurchased during the first quarter of 2005. 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 $586.5 million of first mortgage bonds with internally generated cash since the inception of its deleveraging program in 1996. No first mortgage bonds were repurchased during the first quarter of 2005. Common stock equity as a percentage of capitalization, including the current portion of long-term debt and financing obligations, was approximately 48% as of March 31, 2005.
EBITDA
The change in earnings before interest, income taxes, and depreciation and amortization (“EBITDA”) for the quarter ended March 31, 2005, compared to the same period in 2004, is as follows (in thousands):
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March 31, 2004 | | $ | 39,265 | |
Changes in: | | | | |
Decreased retail base revenues | | | (3,510 | ) |
Increased non-Palo Verde operating and maintenance costs | | | (1,078 | ) |
Increased pensions and benefits costs | | | (739 | ) |
Increased economy sales margins | | | 2,448 | |
Decreased loss on extinguishment of debt | | | 2,107 | |
Decreased taxes other than income taxes | | | 1,121 | |
Decreased insurance expenses | | | 701 | |
Decreased outside services | | | 671 | |
Increased investment and interest income | | | 654 | |
Other | | | 682 | |
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March 31, 2005 | | $ | 42,322 | |
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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. 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 first quarter 2005 earnings and earnings guidance is scheduled for 4 p.m. Eastern Time, April 28, 2005. The dial-in number is 888-795-2173 with a passcode of 2005. The conference leader will be Gary Hedrick, President and Chief Executive Officer of EE. A replay will run through May 13, 2005. The dial-in number is 866-373-4987, 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 on http://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: (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,
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El Paso Electric • P.O. Box 982 • El Paso, Texas 79960
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 Electric • P.O. Box 982 • El Paso, Texas 79960
El Paso Electric Company’s consolidated results of operations for the quarter ended March 31, 2005 and 2004 are summarized as follows (In thousands except for share data):
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| | | Quarter Ended March 31,
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| | | 2005
| | | 2004
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Operating revenues, net of energy expenses | | $ | 103,470 | | | $ | 103,951 | |
Other operating expenses | | | 84,809 | | | | 85,379 | |
Other income (deductions) | | | 91 | | | | (2,486 | ) |
Interest charges | | | 11,019 | | | | 12,051 | |
Income tax expense | | | 2,976 | | | | 1,121 | |
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Net income | | $ | 4,757 | | | $ | 2,914 | |
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Basic earnings per share | | $ | 0.10 | | | $ | 0.06 | |
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Weighted average number of shares outstanding | | | 47,405,270 | | | | 47,451,300 | |
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Diluted earnings per share | | $ | 0.10 | | | $ | 0.06 | |
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Weighted average number of shares and dilutive potential shares outstanding | | | 48,250,450 | | | | 47,900,302 | |
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| | | Quarter Ended March 31,
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| | | 2005
| | | 2004
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Reconciliation of EBITDA to Cash Flow from Operations: | | | | | | | | |
EBITDA | | $ | 42,322 | | | $ | 39,265 | |
Interest expense | | | (11,019 | ) | | | (12,051 | ) |
Income tax expense | | | (2,976 | ) | | | (1,121 | ) |
Other non-cash expenses | | | 7,612 | | | | 6,440 | |
Change in: | | | | | | | | |
Deferred income taxes | | | (2,152 | ) | | | (3,460 | ) |
Current assets | | | 15,839 | | | | 12,882 | |
Current payables and accrued expenses | | | (13,917 | ) | | | 2,509 | |
Other | | | (2,300 | ) | | | 5,619 | |
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Cash Flow from Operating Activities | | $ | 33,409 | | | $ | 50,083 | |
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El Paso Electric Company’s consolidated results of operations for the twelve months ended March 31, 2005 and 2004 are summarized as follows (In thousands except for share data):
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| | | Twelve Months Ended March 31,
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| | | 2005
| | | 2004
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Operating revenues, net of energy expenses | | $ | 447,272 | | | $ | 444,995 | |
Impairment loss on CIS project | | | — | | | | 17,576 | |
Other operating expenses | | | 354,112 | | | | 344,717 | |
Other income (deductions) | | | (1,651 | ) | | | (1,320 | ) |
Interest charges | | | 45,244 | | | | 46,695 | |
Income tax expense | | | 11,053 | | | | 13,494 | |
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Income before extraordinary item | | $ | 35,212 | | | $ | 21,193 | |
Extraordinary item, net (1) | | | 1,802 | | | | — | |
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Net income | | $ | 37,014 | | | $ | 21,193 | |
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Basic earnings per share: | | | | | | | | |
Income before extraordinary item | | $ | 0.74 | | | $ | 0.44 | |
Extraordinary item, net | | | 0.04 | | | | — | |
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Net income | | $ | 0.78 | | | $ | 0.44 | |
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Weighted average number of shares outstanding | | | 47,415,395 | | | | 47,965,274 | |
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Diluted earnings per share: | | | | | | | | |
Income before extraordinary item | | $ | 0.73 | | | $ | 0.44 | |
Extraordinary item, net | | | 0.04 | | | | — | |
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Net income | | $ | 0.77 | | | $ | 0.44 | |
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Weighted average number of shares and dilutive potential shares outstanding | | | 48,107,347 | | | | 48,389,715 | |
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| | | Twelve Months Ended March 31,
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| | | 2005
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Reconciliation of EBITDA to Cash Flow from Operations: | | | | | | | | |
EBITDA (2) | | $ | 185,272 | | | $ | 188,276 | |
Interest expense | | | (45,244 | ) | | | (46,695 | ) |
Income tax expense | | | (11,053 | ) | | | (13,494 | ) |
Other non-cash expenses | | | 29,249 | | | | 24,143 | |
Change in: | | | | | | | | |
Deferred income taxes | | | 1,709 | | | | 7,791 | |
Current assets | | | (18,991 | ) | | | (3,048 | ) |
Current payables and accrued expenses | | | (4,427 | ) | | | (16,035 | ) |
Other | | | (9,103 | ) | | | 6,605 | |
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Cash Flow from Operating Activities | | $ | 127,412 | | | $ | 147,543 | |
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| (1) | Net of income tax expense of $1.0 million. |
| (2) | EBITDA is defined as net income before interest, income taxes, depreciation and amortization, impairment loss, and extraordinary item. |
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Quarter Ended March 31, 2005 and 2004 (In thousands):
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| | | 2005
| | 2004
| | Increase
(Decrease)
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kWh sales: | | | | | | | | | |
Retail: | | | | | | | | | |
Residential | | | 449,464 | | | 468,317 | | (4.0 | %) |
Commercial and industrial, small | | | 435,490 | | | 454,848 | | (4.3 | %) |
Commercial and industrial, large | | | 267,840 | | | 303,390 | | (11.7 | %)(1) |
Sales to public authorities | | | 268,046 | | | 278,904 | | (3.9 | %) |
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Total retail sales | | | 1,420,840 | | | 1,505,459 | | (5.6 | %) |
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Wholesale: | | | | | | | | | |
Sales for resale | | | 8,165 | | | 9,267 | | (11.9 | %) |
Economy sales | | | 587,111 | | | 486,620 | | 20.7 | %(2) |
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Total wholesale sales | | | 595,276 | | | 495,887 | | 20.0 | % |
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Total kWh sales | | | 2,016,116 | | | 2,001,346 | | 0.7 | % |
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Operating revenues: | | | | | | | | | |
Base revenues: | | | | | | | | | |
Retail: | | | | | | | | | |
Residential | | $ | 39,235 | | $ | 40,171 | | (2.3 | %) |
Commercial and industrial, small | | | 35,364 | | | 36,101 | | (2.0 | %) |
Commercial and industrial, large | | | 9,274 | | | 10,290 | | (9.9 | %)(1) |
Sales to public authorities | | | 15,737 | | | 16,558 | | (5.0 | %) |
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Total retail base revenues | | | 99,610 | | | 103,120 | | (3.4 | %) |
Wholesale: | | | | | | | | | |
Sales for resale | | | 325 | | | 392 | | (17.1 | %) |
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Total base revenues | | | 99,935 | | | 103,512 | | (3.5 | %) |
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Fuel revenues | | | 29,528 | | | 31,274 | | (5.6 | %) |
Economy sales | | | 26,710 | | | 18,964 | | 40.8 | %(2) |
Other | | | 3,012 | | | 2,102 | | 43.3 | %(3)(4) |
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Total operating revenues | | $ | 159,185 | | $ | 155,852 | | 2.1 | % |
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Capital Expenditures | | $ | 19,062 | | $ | 15,656 | | | |
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Cash Interest Payments | | $ | 12,104 | | $ | 12,690 | | | |
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Depreciation and Amortization | | $ | 23,570 | | $ | 23,179 | | | |
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EBITDA | | $ | 42,322 | | $ | 39,265 | | | |
| (1) | Primarily due to the closure or significantly reduced operations of several customers. |
| (2) | Primarily due to increased available generation and higher market prices. |
| (3) | Primarily due to increased transmission revenues. |
| (4) | Represents revenues with no related kWh sales. |
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Twelve Months Ended March 31, 2005 and 2004 (In thousands):
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| | | 2005
| | 2004
| | Increase
(Decrease)
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kWh sales: | | | | | | | | | |
Retail: | | | | | | | | | |
Residential | | | 1,967,232 | | | 1,969,286 | | (0.1 | %) |
Commercial and industrial, small | | | 2,096,464 | | | 2,114,145 | | (0.8 | %) |
Commercial and industrial, large | | | 1,200,875 | | | 1,235,714 | | (2.8 | %) |
Sales to public authorities | | | 1,232,146 | | | 1,245,747 | | (1.1 | %) |
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Total retail sales | | | 6,496,717 | | | 6,564,892 | | (1.0 | %) |
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Wholesale: | | | | | | | | | |
Sales for resale | | | 39,991 | | | 67,129 | | (40.4 | %)(1) |
Economy sales | | | 1,938,958 | | | 1,791,814 | | 8.2 | % |
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Total wholesale sales | | | 1,978,949 | | | 1,858,943 | | 6.5 | % |
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Total kWh sales | | | 8,475,666 | | | 8,423,835 | | 0.6 | % |
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Operating revenues: | | | | | | | | | |
Base revenues: | | | | | | | | | |
Retail: | | | | | | | | | |
Residential | | $ | 173,816 | | $ | 174,247 | | (0.2 | %) |
Commercial and industrial, small | | | 165,023 | | | 165,830 | | (0.5 | %) |
Commercial and industrial, large | | | 42,134 | | | 43,698 | | (3.6 | %) |
Sales to public authorities | | | 71,899 | | | 73,805 | | (2.6 | %) |
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Total retail base revenues | | | 452,872 | | | 457,580 | | (1.0 | %) |
Wholesale: | | | | | | | | | |
Sales for resale | | | 1,608 | | | 3,225 | | (50.1 | %)(1) |
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Total base revenues | | | 454,480 | | | 460,805 | | (1.4 | %) |
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Fuel revenues | | | 159,306 | | | 132,538 | | 20.2 | %(2) |
Economy sales | | | 86,279 | | | 70,469 | | 22.4 | %(3) |
Other | | | 11,896 | | | 8,916 | | 33.4 | %(4)(5) |
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Total operating revenues | | $ | 711,961 | | $ | 672,728 | | 5.8 | % |
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Capital Expenditures | | $ | 75,905 | | $ | 79,969 | | | |
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Cash Interest Payments | | $ | 48,806 | | $ | 50,026 | | | |
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Depreciation and Amortization | | $ | 93,763 | | $ | 89,318 | | | |
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EBITDA | | $ | 185,272 | | $ | 188,276 | | | |
| (1) | Primarily due to sales to the CFE in 2003 with no comparable sales 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 increased available generation and higher market prices. |
| (4) | Primarily due to increased transmission revenues. |
| (5) | Represents revenues with no related kWh sales. |
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At March 31, 2005 and 2004 (In thousands, except number of shares and book value per share):
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| | | 2005
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Cash and Temporary Investments | | $ | 39,950 | | $ | 44,348 |
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Common Stock Equity | | $ | 536,500 | | $ | 499,239 |
Long-Term Debt, Net of Current Portion | | | 183,555 | | | 574,159 |
Financing Obligations, Net of Current Portion | | | 18,418 | | | — |
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Total Capitalization | | $ | 738,473 | | $ | 1,073,398 |
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Current Portion of Long-Term Debt and Financing Obligations | | $ | 389,764 | | $ | 40,838 |
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Number of Shares | | | 47,730,776 | | | 47,588,360 |
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Book Value Per Share | | $ | 11.24 | | $ | 10.49 |
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Number of Retail Customers | | | 334 | | | 327 |
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