8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):

April 27, 2004

El Paso Electric Company

(Exact name of registrant as specified in its charter)

Texas	0-296	74-0607870
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

Stanton Tower, 100 North Stanton, El Paso, Texas	79901
(Address of principal executive offices)	(Zip Code)

(915) 543-5711

(Registrant’s telephone number, including area code)

ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS

(c) Exhibits

99.01 Earnings Press Release, dated April 27, 2004

ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On April 27, 2004, the Company announced its financial results for the quarter ended March 31, 2004. A copy of the press release containing the announcement is included as Exhibit 99.01 to this Current Report and is incorporated herein by reference. The Company does not intend for this exhibit to be incorporated by reference into future filings under the Securities Exchange Act of 1934.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

EL PASO ELECTRIC COMPANY
By:	/s/    Terry Bassham
	Terry Bassham Executive Vice President, Chief Financial and Administrative Officer (Duly Authorized Officer and Principal Financial Officer)

Dated: April 27, 2004

EX-99.01

EXHIBIT 99.01

El Paso Electric

NEWS RELEASE

For Immediate Release	Contact:	Investor
Date: April 27, 2004	Media	Relations:
	Teresa Souza	Steve Busser
	915/543-5823	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, 2004 of $3.0 million, or $0.06 basic and diluted income per share. Net income before the cumulative effect of accounting change for the same period last year was $2.1 million, or $0.04 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 in the amount of $39.6 million, or $0.81 and $0.80 basic and diluted earnings per share, respectively, related to the adoption of SFAS No. 143 “Accounting for Asset Retirement Obligations” on January 1, 2003.

The increase in earnings for the quarter ended March 31, 2004 when compared to the quarter ended March 31, 2003, 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 an increase in the loss on extinguishment of debt, increased depreciation and amortization expense, decreased sales and margins on economy sales, increased outside services, and increased insurance expenses.

“Continued internal cost-control efforts and strong retail sales during the quarter contributed to our positive financial performance for the quarter,” said Gary Hedrick, El Paso Electric President and CEO. “We will continue to focus on these aspects of our business as well as trying to take advantages of opportunities in the economy market.”

In February 2004, the Board of Directors authorized a new stock repurchase program permitting the repurchase of up to 2 million shares. Since the inception of the stock repurchase programs in 1999, EE has repurchased 15.0 million shares in total at an aggregate cost of $171 million, including commissions. No common stock was repurchased during the first quarter of 2004. 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 $564.8 million of first mortgage bonds with internally generated cash since inception of its deleveraging program in 1996. During the first quarter of 2004, EE repurchased $14.3 million of first mortgage bonds. Common stock equity as a percentage of capitalization, including the current portion of long-term debt and financing obligations, was approximately 45% as of March 31, 2004.

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El Paso Electric · P.O. Box 982 · El Paso, Texas 79960

EBITDA

The change in earnings before interest, income taxes, depreciation and amortization and cumulative effect of accounting change (“EBITDA”) for the quarter ended March 31, 2004, compared to the same period in 2003, is as follows (in thousands):

March 31, 2003	$	36,264
Changes in:
Decreased non-Palo Verde maintenance		5,660
Increased retail sales		4,257
Increased loss on extinguishment of debt		(2,106	)
Decreased economy sales and/or margins		(1,689	)
Increased outside services		(1,157	)
Increased insurance expenses		(709	)
Other		(1,255	)
March 31, 2004	$	39,265

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 first quarter 2004 earnings and earnings guidance is scheduled for 4 p.m. Eastern Time, April 27, 2004. The dial-in number is 800-621-7732 with a passcode of 2004. The conference leader will be Terry Bassham, Chief Financial and Administrative Officer of EE. A replay will run through May 12, 2004. The dial-in number is 800-454-0163, 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, 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, 2004 and 2003 are summarized as follows (In thousands except for share data):

	Quarter Ended March 31,
	2004			2003
Operating revenues, net of energy expenses	$	103,951		$	102,359
Other operating expenses		85,011			86,825
Other income (deductions)		(2,734	)		(632	)
Interest charges		12,051			11,879
Income tax expense		1,168			907
Income before cumulative effect		2,987			2,116
Cumulative effect of accounting change, net (1)		—			39,635
Net income	$	2,987		$	41,751
Basic earnings per share:
Income before cumulative effect	$	0.06		$	0.04
Cumulative effect of accounting change, net		—			0.81
Net income	$	0.06		$	0.85
Weighted average number of shares outstanding		47,451,300			49,306,844
Diluted earnings per share:
Income before cumulative effect	$	0.06		$	0.04
Cumulative effect of accounting change, net		—			0.80
Net income	$	0.06		$	0.84
Weighted average number of shares and dilutive potential shares outstanding		47,900,302			49,620,276
	Quarter Ended March 31,
	2004			2003
Reconciliation of EBITDA to Cash Flow from Operations:
EBITDA	$	39,265		$	36,264
Interest expense		(12,051	)		(11,879	)
Income tax expense		(1,168	)		(907	)
Other non-cash expenses		6,440			6,415
Change in:
Deferred income taxes		(3,413	)		(1,141	)
Current assets		12,882			13,095
Current payables and accrued expenses		2,510			(6,352	)
Other		5,618			2,059
Cash Flow from Operating Activities	$	50,083		$	37,554

(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 March 31, 2004 and 2003, and consolidated proforma results of operations for the twelve months ended March 31, 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 March 31,
	2004			2003			Pro forma 2003
Operating revenues, net of energy expenses	$	444,995		$	455,502		$	455,502
Impairment loss on CIS project		17,576			—			—
FERC settlements		—			15,500			15,500
Other operating expenses		343,798			340,927			341,463
Other income (deductions)		(1,759	)		(4,032	)		(4,032	)
Interest charges		46,695			55,275			49,082
Income tax expense		13,680			14,535			16,725
Income before cumulative effect		21,487			25,233			28,700
Cumulative effect of accounting change, net (1)		—			39,635			—
Net income	$	21,487		$	64,868		$	28,700
Basic earnings per share:
Income before cumulative effect	$	0.45		$	0.51		$	0.58
Cumulative effect of accounting change, net		—			0.80			—
Net income	$	0.45		$	1.31		$	0.58
Weighted average number of shares outstanding		47,965,274			49,692,437			49,692,437
Diluted earnings per share:
Income before cumulative effect	$	0.44		$	0.50		$	0.57
Cumulative effect of accounting change, net		—			0.79			—
Net income	$	0.44		$	1.29		$	0.57
Weighted average number of shares and dilutive potential shares outstanding		48,389,715			50,129,975			50,129,975
	Twelve Months Ended March 31,
	2004			2003			Pro forma 2003
Reconciliation of EBITDA to Cash Flow from Operations:
EBITDA	$	188,276		$	183,420		$	180,144
Interest expense		(46,695	)		(55,275	)		(49,082	)
Income tax expense		(13,680	)		(14,535	)		(16,725	)
Other non-cash expenses		24,143			28,676			25,760
Change in:
Deferred income taxes		7,977			67			2,256
Current assets		(3,048	)		7,064			7,064
Current payables and accrued expenses		(16,034	)		19,861			19,861
Other		6,604			6,186			6,186
Cash Flow from Operating Activities	$	147,543		$	175,464		$	175,464

(1) Net of income tax expense of approximately $25.0 million.

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Quarter Ended March 31, 2004 and 2003 (In thousands):

	2004		2003		Increase (Decrease)
kWh sales:
Retail:
Residential		468,317		431,202	8.6	%
Commercial and industrial, small		454,848		437,563	4.0	%
Commercial and industrial, large		303,390		264,741	14.6	%
Sales to public authorities		278,904		257,505	8.3	%
Total retail sales		1,505,459		1,391,011	8.2	%
Wholesale:
Sales for resale		9,267		9,893	(6.3	%)
Economy sales		486,620		615,688	(21.0	%)	(1	)
Total wholesale sales		495,887		625,581	(20.7	%)
Total kWh sales		2,001,346		2,016,592	(0.8	%)
Operating revenues:
Base revenues:
Retail:
Residential	$	40,171	$	37,383	7.5	%
Commercial and industrial, small		36,101		35,705	1.1	%
Commercial and industrial, large		10,290		9,886	4.1	%
Sales to public authorities		16,558		15,889	4.2	%
Total retail base revenues		103,120		98,863	4.3	%
Wholesale:
Sales for resale		392		390	0.5	%
Total base revenues		103,512		99,253	4.3	%
Fuel revenues		31,274		21,497	45.5	%	(2	)
Economy sales		18,964		25,031	(24.2	%)	(1	)
Other		2,102		1,705	23.3	%	(3	)	(4	)
Total operating revenues	$	155,852	$	147,486	5.7	%
Capital Expenditures	$	15,656	$	12,767
Cash Interest Payments	$	12,690	$	14,260
Depreciation and Amortization	$	23,059	$	21,362
EBITDA	$	39,265	$	36,264

(1) Primarily due to decreased available power as a result of outages at Palo Verde.

(2) Primarily due to an increase in recoverable fuel expenses, as a result of an increase in the volume of natural gas burned, and an increase in kWh sales.

(3) Primarily due to increased transmission revenues.

(4) Represents revenues with no related kWh sales.

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Twelve Months Ended March 31, 2004 and 2003 (In thousands):

	2004		2003				Increase (Decrease)
kWh sales:
Retail:
Residential		1,969,286		1,869,476			5.3	%
Commercial and industrial, small		2,114,145		2,083,192			1.5	%
Commercial and industrial, large		1,235,714		1,164,564			6.1	%
Sales to public authorities		1,245,747		1,208,276			3.1	%
Total retail sales		6,564,892		6,325,508			3.8	%
Wholesale:
Sales for resale		67,129		647,541			(89.6	%)	(1	)
Economy sales		1,791,814		1,985,987			(9.8	%)
Total wholesale sales		1,858,943		2,633,528			(29.4	%)
Total kWh sales		8,423,835		8,959,036			(6.0	%)
Operating revenues:
Base revenues:
Retail:
Residential	$	174,247	$	165,899			5.0	%
Commercial and industrial, small		165,830		164,161			1.0	%
Commercial and industrial, large		43,698		43,465			0.5	%
Sales to public authorities		73,805		70,966			4.0	%
Total retail base revenues		457,580		444,491			2.9	%
Wholesale:
Sales for resale		3,225		20,648			(84.4	%)	(1	)
Total base revenues		460,805		465,139			(0.9	%)
Fuel revenues		132,538		147,671			(10.2	%)	(1	)
Economy sales		70,469		65,914			6.9	%
Other		8,916		9,651			(7.6	%)	(2	)
Total operating revenues	$	672,728	$	688,375			(2.3	%)
Capital Expenditures	$	79,969	$	62,130
Cash Interest Payments	$	50,026	$	53,618
Depreciation and Amortization	$	88,838	$	88,378	(3	)
EBITDA	$	188,276	$	183,420	(4	)

(1) Primarily due to the expiration of wholesale power contracts with TNP on December 31, 2002 and IID on April 30, 2002, and reduced sales to the CFE.

(2) Represents revenues with no related kWh sales.

(3) Pro forma depreciation and amortization would be $85,637 assuming SFAS No. 143 had been applied on a retroactive basis.

(4) Pro forma EBITDA would be $180,144 assuming SFAS No. 143 had been applied on a retroactive basis.

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At March 31, 2004 and 2003 (In thousands, except number of shares and book value per share):

	2004		2003
Cash and Temporary Investments	$	44,348	$	44,300
Common Stock Equity	$	503,366	$	493,541
Long-Term Debt, Net of Current Portion		574,159		588,621
Financing Obligations, Net of Current Portion		—		23,377
Total Capitalization	$	1,077,525	$	1,105,539
Current Portion of Long-Term Debt and Financing Obligations	$	40,838	$	21,833
Number of Shares		47,588,360		49,148,782
Book Value Per Share	$	10.58	$	10.04
Number of Retail Customers		327		318

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