Original Source: FD (FAIR DISCLOSURE) WIRE
OPERATOR: Good afternoon, thank you all for standing by. (OPERATOR INSTRUCTIONS) Todays conference is being recorded if you have any objections you may disconnect at this time. I'd now like to turn the call over to Mr. Steve Busser. Thank you, sir, you may begin.
STEVE BUSSER, TREASURER, VICE PRESIDENT, EL PASO ELECTRIC: Thank you, Angie. Good Afternoon everyone, thank you for tuning in to El Paso Electric's second quarter 2007 earnings conference call. My name is Steve Busser and I am the Vice President, Treasurer, and Chief Risk Officer at El Paso Electric. Also on the call with me today, I have our President and CEO Ershel Redd and our Chief Financial Officer Scott Wilson. Today we'll provide an update on our second quarter 2007 financial performance, including a discussion of our pertinent earnings drivers. We'll also update our 2007 earnings guidance and finally we will provide an update on our Texas and New Mexico regulatory developments. I'd like now to cover some items that will be pertinent to our call today. You should have a copy of our press release, if you do not, can you obtain one from our website at www.EPelectric.com on the investor relations page. Along with our call today we have a web cast presentation available for viewing as we progress through the call. Both the audio and video presentation will be done via the web. In order to ask questions during the Q & A, you will need to be dialed in by a telephone. We currently anticipate that our second quarter form 10-Q will be filed with the SEC during the week of August 6, 2007. As for upcoming IR events, we'll be attending the EI annual conference in Orlando on November 4th through 7th. We'll provide further updates as to any investor relations events on future conference calls. Please call our investor relations department if you have any inquiries or require further information. A replay of today's call will be available shortly after the call ends. The number is 800-239-4561 and will be available through August 17, 2007. And a pass code is not required for the replay. Let me cover the safe harbor provisions before I turn the call over to Ershel. Our comments and answers to your questions may include forward-looking statements.
Be reminded that statements made on this conference call other than statements of Historical fact are forward looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward looking statements as well as other forward looking statements made by or on behalf of the company involve known and unknown risks and other factors which may cause the company's actual results in future periods to differ materially from those expressed here. Any such statements qualified by reference to the risks and factors discussed in our SEC act filings our 10-K and other SEC filings contain our forward looking statements and also lay out the risk factors that should be considered in the context of the information that we will provide today. These filings may be obtained upon request from the company via our website or from the SEC. The company cautions that the risk factors discussed in these filings are not exclusive. We do not undertake to update any forward looking statements that may be made from time to time by or on behalf of the company. These statements especially those made during the Q&A session of the call are subject to risks and uncertainties that are difficult to predict. Please refer to our SEC act filings for detailed discussion of these risks and uncertainties. Now I'd like to turn the call over to our President and CEO, Ershel Redd.
ERSHEL REDD, PRESIDENT, CEO, EL PASO ELECTRIC: Thank you, Steve. And again welcome to our second quarter, 2007 earnings call. Although the weather had a negative impact on earnings for the quarter. We are still pleased with the overall business results and the fact that we were able to significantly reduce operating and maintenance costs at our local generating plants for the quarter and on a year-to-date basis. This afternoon, I'll give you a highlight review of our second quarter everyone year-to-date earnings. Then review for you our first 60 days initiatives and conclude with an update of several major issues affecting the company. Including a recent development in New Mexico. The second quarter of 2007, the company posted net income of $9.6 million or $0.21 per basic share. In comparison, we earned $15.2 million or $0.32 per basic share in the second quarter of 2006. That included in 2006 a $0.13 per basis share one time Texas franchise tax benefit. If you exclude this item we are $9 million or $0.19 per basic share in the second quarter of 2006. Our second quarter 2007 earnings were positively impacted by a $5 million pretax decline in operating and maintenance expense in our local gas powered plants and a $2.4 million increase on margins on off system sales. These positive drivers were partially offset by $4.5 million pretax decrease and non-fuel based revenues that decline in based revenues was a result of reduced kilowatt hour sales due to a 28% reduction in cooling degree days in the second quarter of this year compared to the same period a year ago. 2007 year-to-date basic earnings per share $0.54 compared favorably to 2006 year-to-date earnings of $0.51 per share. The 2006 year-to-date earnings were also affected by the one-time Texas franchise tax benefit recorded in the second quarter of '06. Excluding this one-time benefit. The comparative '06 earnings would have been $0.38 per basic share. Positively affecting the year to date results is the $6.9 million pretax decline in operating and maintenance expenses at our local gas fired plants.
A $4.5 million increase in retained margins on all system sales and the increase in capitalized interest, AFUDC, resulting from implementation of FAS 76 in our Texas jurisdiction at years end. These positive drivers were partially offset by the one-time Texas franchise tax benefit records in the second quarter of 2006. Without any offsetting 2007 amounts. In a few moments Scott Wilson will detail these in much greater depth. I've been your CEO for 80 days now and I've identified and initiated a number of priorities designed to make this company more valuable to our investors, customers and employees. My first priority is to ensure that we build our new generation station at Newman 5 on time and or at budget. This process has begun with the filing of all required permits. We've begun ordering equipment and we're effectively using after market to identify and procure some of the major equipment we'll need. The after market provides us a way to hold the line on costs, provided we obtained equipment in new or almost new condition we anticipate bringing this unit online in stages between -- beginning in may of 2009. We all know the importance of Palo Verde to our company. I've made it a priority to continue to take a hands on approach to ensure the Palo Verde management team maintains there focus on improving that operation. They will constantly feel our presence and to date they've appeared to be a minimal to the input that we have provided. We have two major rate cases and a large fuel reconciliation case ahead of us over the next three years. We will begin to manage expectations now by clearly communicating with our regulator constituencies every step of the way as we begin those processes, our regulators will be fully informed of all the facts and issues. I intend to thoroughly review all aspects of our business in an effort to improve …