EL PASO, Texas, April 29, 2003 — El Paso Electric has 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 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.