ITC Holdings Reports Increased Second Quarter and Year-To-Date 2010 Results; Raises 2010 Earnings Per Share Guidance

Jul 28, 2010

NOVI, Mich., July 28, 2010 /PRNewswire via COMTEX News Network/ --

Highlights

  • Net income for the second quarter of $36.3 million, or $0.71 per diluted common share
  • Net income for the six months ended June 30, 2010 of $70.5 million, or $1.38 per diluted common share
  • Capital investments of $216.0 million for the six months ended June 30, 2010
  • 2010 earnings per share guidance increased to $2.70 to $2.75 per diluted common share

    (in thousands, except
     per share data)         Three months ended         Six months ended
                             ------------------         ----------------
                                  June 30,                  June 30,
                                  --------                  --------
                              2010           2009     2010           2009
                              ----           ----     ----           ----
    OPERATING REVENUES    $168,468       $157,238 $329,756       $313,179

    NET INCOME             $36,301        $30,793  $70,505        $59,518

    DILUTED EPS              $0.71          $0.61    $1.38          $1.17




ITC Holdings Corp. (NYSE: ITC) today announced its second quarter and year-to-date results for the period ended June 30, 2010. Net income for the quarter was $36.3 million, or $0.71 per diluted common share, compared to $30.8 million, or $0.61 per diluted common share for the second quarter of 2009. Net income for the six months ended June 30, 2010 was $70.5 million, or $1.38 per diluted common share, compared to $59.5 million, or $1.17 per diluted common share for the same period last year.

For the six months ended June 30, 2010, ITC invested $216.0 million in capital projects at its operating companies, including $29.3 million, $65.5 million, $114.1 million and $7.1 million at ITCTransmission, METC, ITC Midwest and ITC Great Plains, respectively.

"We are very pleased with both our fiscal and operational performance for the first half of 2010," said Joseph L. Welch, chairman, president and CEO of ITC. "ITC continues to deliver on our commitments to our customers and shareholders through the successful execution of our strategic plan. In addition, as we look to the future, we are encouraged by recent regulatory developments that suggest the necessary transmission reforms we have been advocating are beginning to advance, particularly in the areas of planning and cost allocation. We anticipate these regulatory initiatives will facilitate the development of more regional transmission infrastructure to improve energy delivery, reliability and efficiency, and allow for the interconnection of new renewable resources, consistent with our longer term strategic vision."

Reported net income for the second quarter of 2010 increased $5.5 million, or $0.10 per diluted common share, compared to the same period in 2009. For the six months ended June 30, 2010, net income increased $11.0 million, or $0.21 per diluted common share, compared to the same period in 2009. Key drivers that contributed to these results include:

  • An increase in net income for the quarter and year-to-date period due to higher rate base and Allowance for Funds Used During Construction (AFUDC) at all operating companies.
  • Higher net income for the quarter and year-to-date period due to lower non-recoverable expenses.
  • These increases in net income for the quarter and year-to-date period were partially offset by higher interest expense resulting from our recently completed financing activities for ITC Holdings.

EPS and Capital Expenditure Guidance

As a result of ITC's financial performance for the six months ended June 30, 2010, ITC is today raising its 2010 earnings per diluted common share guidance to a range of $2.70 to $2.75, from a previous range of $2.60 to $2.70.

ITC is also revising its capital investment guidance for 2010 to a range of $420 million to $460 million, from a range of $405 million to $460 million. The revised guidance reflects expected capital expenditures of $50 to $60 million, $130 to $140 million, $220 to $235 million and $20 to $25 million for ITCTransmission, METC, ITC Midwest and ITC Great Plains, respectively.

Second Quarter 2010 Financial Results Detail

ITC's operating revenues for the second quarter increased to $168.5 million from $157.2 million for the same period last year. This increase was a primarily due to higher network revenues attributable to higher rate base at our regulated operating subsidiaries. In addition, the increase resulted from higher regional cost sharing revenues in 2010, due primarily to capital projects placed in-service that have been identified by the Midwest Independent Transmission System Operator, Inc. (MISO) as eligible for regional cost sharing.

Operation and maintenance (O&M) expenses of $28.5 million were $6.6 million higher during the second quarter of 2010 compared to the same period in 2009. This increase was a result of higher vegetation management expenses, equipment and structure maintenance expenses and tower painting expenses.

General and administrative (G&A) expenses of $17.4 million were $2.8 million lower during the second quarter of 2010 compared to the same period in 2009. This decrease was a result of lower general business expenses primarily for information technology support, employee related expenses and professional advisory and consulting services. In addition, G&A expenses for the quarter include $1.5 million of development costs at ITC Grid Development and Green Power Express which were $0.6 million lower than the same period in 2009.

Depreciation and amortization expenses of $22.6 million decreased by $3.6 million during the second quarter of 2010 compared to the same period in 2009. This decrease was due to the implementation of new depreciation rates for ITCTransmission and METC in the third and fourth quarters of 2009, respectively, which served to lower depreciation expense for each of these operating companies. Partially offsetting these reductions were increases in depreciation expense primarily related to a higher depreciable asset base resulting from property, plant and equipment additions.

Interest expense of $35.3 million increased by $2.7 million for the second quarter of 2010 compared to the same period in 2009, due primarily to higher borrowing levels to finance capital expenditures.

The effective income tax rate for the second quarter of 2010 was 36.8 percent compared to 37.7 percent the same period last year.

Year-To-Date 2010 Financial Results Detail

ITC's operating revenues for the six months ended June 30, 2010 increased to $329.8 million from $313.2 million for the same period last year. This increase was primarily due to higher network revenues attributable to higher rate base at our regulated operating subsidiaries. In addition, the increase resulted from higher regional cost sharing revenues in 2010, due primarily to capital projects placed in-service that have been identified by MISO as eligible for regional cost sharing. Lastly, other revenues increased at METC due to incremental revenue recognized in 2010 for utilization of jointly owned transmission lines.

O&M expenses of $52.2 million were $6.6 million higher for the six months ended June 30, 2010 compared to the same period in 2009. This increase was a result of higher vegetation management expenses, equipment and structure maintenance expenses and tower painting expenses.

G&A expenses of $35.2 million for the six months ended June 30, 2010 were $5.0 million lower compared to the same period in 2009. This decrease was a result of lower general business expenses primarily for information technology support, employee related expenses and professional advisory and consulting services. In addition, G&A expenses for the six months ended June 30, 2010 include $3.9 million of development costs at ITC Grid Development and Green Power Express which were $1.2 million lower than the same period in 2009.

Depreciation and amortization expenses of $44.7 million decreased by $8.1 million during the six months ended June 30, 2010, compared to the same period in 2009. This decrease was due to the implementation of new depreciation rates for ITCTransmission and METC in the third and fourth quarters of 2009, respectively, which served to lower depreciation expense for each of these operating companies. Partially offsetting these reductions were increases in depreciation expense primarily related to a higher depreciable asset base resulting from property, plant and equipment additions.

Interest expense of $70.4 million increased $6.1 million in the first six months of 2010 compared to the same period in 2009, due primarily to higher borrowing levels to finance capital expenditures.

The effective income tax rate for the six months ended June 30, 2010 was 36.5 percent compared to 37.4 percent in 2009.

Second Quarter Conference Call

ITC will conduct a conference call to discuss second quarter and year-to-date 2010 earnings results at 11:00 a.m. ET on July 29, 2010. Joseph L. Welch, chairman, president and CEO, will provide a business overview, and Cameron M. Bready, senior vice president, treasurer and CFO, will discuss the financial results. Individuals wishing to participate in the conference call may dial toll-free (877) 644-1296 (domestic) or (914) 495-8555 (international); there is no passcode. The conference call replay, available through August 13, 2010, can be accessed by dialing toll-free (800) 642-1687 (domestic) or (706) 645-9291 (international), passcode 87281817. Investors, the news media and the public may listen to a live internet broadcast of the meeting at http://investor.itc-holdings.com. The webcast also will be archived on the ITC website at http://investor.itc-holdings.com.

Other Available Information

More detail about the 2010 second quarter results and year-to-date results may be found in ITC's Form 10-Q filing. Once filed with the Securities and Exchange Commission, an electronic copy of our 10-Q can be found at our website, http://investor.itc-holdings.com. Written copies can also be made available by contacting us either through our website or the phone listings below.

About ITC Holdings Corp.

ITC Holdings Corp. (NYSE: ITC) invests in the electricity transmission grid to improve electric reliability, expand access to markets, lower the overall cost of delivered energy and allow new generating resources to interconnect to its transmission systems. The largest independent electricity transmission company in the country, ITC operates high-voltage transmission systems in Michigan's Lower Peninsula and portions of Iowa, Minnesota, Illinois, Missouri and Kansas, serving a combined peak load in excess of 25,000 megawatts through its regulated operating subsidiaries, ITCTransmission, Michigan Electric Transmission Company (METC), ITC Midwest and ITC Great Plains. ITC also focuses on new areas where significant transmission system improvements are needed through ITC Grid Development and its subsidiaries. For more information, please visit: http://www.itc-holdings.com. (itc-ITC)

Safe Harbor Statement

This press release contains certain statements that describe our management's beliefs concerning future business conditions, plans and prospects, growth opportunities and the outlook for our business and the electricity transmission industry based upon information currently available. Such statements are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. Wherever possible, we have identified these forward-looking statements by words such as "will," "may," "anticipates", "believes", "intends", "estimates", "expects", "projects" and similar phrases. These forward-looking statements are based upon assumptions our management believes are reasonable. Such forward looking statements are subject to risks and uncertainties which could cause our actual results, performance and achievements to differ materially from those expressed in, or implied by, these statements, including, among others, the risks and uncertainties disclosed in our annual report on Form 10-K and our quarterly reports on Form 10-Q filed with the Securities and Exchange Commission from time to time.

Because our forward-looking statements are based on estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond our control or are subject to change, actual results could be materially different and any or all of our forward-looking statements may turn out to be wrong. Forward-looking statements speak only as of the date made and can be affected by assumptions we might make or by known or unknown risks and uncertainties. Many factors mentioned in our discussion in this release and in our annual and quarterly reports will be important in determining future results. Consequently, we cannot assure you that our expectations or forecasts expressed in such forward-looking statements will be achieved. Actual future results may vary materially. Except as required by law, we undertake no obligation to publicly update any of our forward-looking or other statements, whether as a result of new information, future events, or otherwise.

    ITC HOLDINGS CORP. AND SUBSIDIARIES
    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

    (in thousands,                  Three
     except per share               months               Six months
     data)                          ended                   ended
                                  June 30,                June 30,
                                  --------                --------
                                2010         2009         2010         2009
                                ----         ----         ----         ----
    OPERATING REVENUES      $168,468     $157,238     $329,756     $313,179

    OPERATING EXPENSES

      Operation and
       maintenance            28,494       21,919       52,223       45,660
      General and
       administrative         17,413       20,253       35,194       40,146
      Depreciation and
       amortization           22,567       26,187       44,682       52,735
      Taxes other than
       income taxes           11,626       10,612       23,934       21,710
      Other operating
       income and expense
       - net                    (530)           -         (523)           -
                                ----          ---         ----          ---
        Total operating
         expenses             79,570       78,971      155,510      160,251
                              ------       ------      -------      -------

    OPERATING INCOME          88,898       78,267      174,246      152,928

    OTHER EXPENSES
     (INCOME)

      Interest expense        35,333       32,661       70,362       64,254
      Allowance for
       equity funds used
       during
       construction           (3,435)      (3,232)      (6,578)      (5,998)
      Other income            (1,154)      (1,065)      (1,672)      (1,391)
      Other expense              755          463        1,031          970
                                 ---          ---        -----          ---
        Total other
         expenses (income)    31,499       28,827       63,143       57,835
                              ------       ------       ------       ------

    INCOME BEFORE
     INCOME TAXES             57,399       49,440      111,103       95,093

    INCOME TAX
     PROVISION                21,098       18,647       40,598       35,575
                              ------       ------       ------       ------

    NET INCOME               $36,301      $30,793      $70,505      $59,518
                             =======      =======      =======      =======

    Basic earnings per
     common share              $0.72        $0.62        $1.40        $1.19
    Diluted earnings
     per common share          $0.71        $0.61        $1.38        $1.17

    Dividends declared
     per common share         $0.320       $0.305       $0.640       $0.610



    ITC HOLDINGS CORP. AND SUBSIDIARIES
    CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)

    (in thousands, except share           June          December
     data)                                 30,             31,
                                             2010            2009
                                             ----            ----
    ASSETS
      Current assets
        Cash and cash equivalents         $81,439         $74,853
        Accounts receivable                86,263          72,352
        Inventory                          39,117          36,834
        Deferred income taxes              30,662          23,859
       Regulatory assets - revenue
        accrual (including accrued
        interest of $1,843 and
        $2,652, respectively)              54,214          82,871
        Other                               7,955           3,244
                                            -----           -----
         Total current assets             299,650         294,013

      Property, plant and
       equipment (net of
       accumulated depreciation
       and                              2,699,275       2,542,064
      amortization of $1,085,126
       and $1,051,045,
       respectively)
      Other assets
        Goodwill                          950,163         950,163
        Intangible assets (net of
         accumulated amortization of
         $10,636 and $9,095,               50,525          51,987
         respectively)
        Regulatory assets - revenue
         accrual (including accrued
         interest                          13,305          20,406
         of $75 and $75,
          respectively)
        Other regulatory assets           134,448         134,924
        Deferred financing fees (net
         of accumulated amortization
         of $10,417 and                    21,200          21,672
               $9,616, respectively)
        Other                              15,853          14,487
                                           ------          ------
         Total other assets             1,185,494       1,193,639
    TOTAL ASSETS                       $4,184,419      $4,029,716
                                       ==========      ==========

    LIABILITIES AND
     STOCKHOLDERS' EQUITY
      Current liabilities
        Accounts payable                  $67,834         $43,508
        Accrued payroll                     8,795          13,648
        Accrued interest                   44,519          39,099
        Accrued taxes                      26,427          21,188
        Regulatory liabilities -
         revenue deferral (including
         accrued interest of $230)          6,854               -
        Refundable deposits from
         generators for transmission
         network upgrades                  33,841          25,891
        Other                               4,023           3,344
                                            -----           -----
         Total current liabilities        192,293         146,678

      Accrued pension and
       postretirement liabilities          34,591          31,158
      Deferred income taxes               301,329         255,516
      Regulatory liabilities -
       revenue deferral (including
       interest of $230 and $186,
       respectively)                       14,302          10,238
      Regulatory liabilities -
       accrued asset removal costs        111,369         112,430
      Refundable deposits from
       generators for transmission
       network upgrades                     4,121          17,664
      Other                                11,596          10,111
      Long-term debt                    2,457,774       2,434,398
      Commitments and contingent
       liabilities

    STOCKHOLDERS' EQUITY
       Common stock, without par
        value, 100,000,000 shares
        authorized, 50,286,030 and
        50,084,061 shares issued
        and outstanding at June 30,
              2010 and December 31,
              2009, respectively          869,621       862,512
        Retained earnings                 188,156         149,776
        Accumulated other
         comprehensive loss                  (733)           (765)
                                             ----            ----
         Total stockholders' equity     1,057,044       1,011,523
                                        ---------       ---------
    TOTAL LIABILITIES AND
     STOCKHOLDERS' EQUITY              $4,184,419      $4,029,716
                                       ==========      ==========



    ITC HOLDINGS CORP. AND SUBSIDIARIES
    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

                                                  Six months
    (in thousands)                                   ended
                                                   June 30,
                                                   --------
                                                 2010           2009
                                                 ----           ----
    CASH FLOWS FROM OPERATING
     ACTIVITIES
      Net income                              $70,505        $59,518
      Adjustments to reconcile net
       income to net cash provided by
       operating activities:
        Depreciation and amortization
         expense                               44,682         52,735
        Revenue accrual and deferral -
         including accrued interest            46,676         (4,817)
        Deferred income tax expense            35,191         34,902
        Allowance for equity funds used
         during construction                   (6,578)        (5,998)
        Other                                   5,937          4,955
        Changes in assets and
         liabilities, exclusive of
         changes shown separately:
         Accounts receivable                  (13,911)       (22,510)
         Inventory                             (2,283)        (6,822)
         Other current assets                  (4,711)        (1,425)
         Accounts payable                      (1,410)       (10,094)
         Accrued payroll                       (3,421)        (1,990)
         Accrued interest                       5,420            (86)
         Accrued taxes                          5,996          7,239
         Other current liabilities                681         (3,353)
         Other non-current assets and
          liabilities, net                        624          6,162
                                                  ---          -----
           Net cash provided by operating
            activities                        183,398        108,416

    CASH FLOWS FROM INVESTING
     ACTIVITIES
      Expenditures for property,
       plant and equipment                   (162,585)      (213,927)
      Proceeds from sale of
       securities                              14,576            697
      Purchases of securities                 (14,587)          (761)
      Other                                       (78)          (225)
                                                  ---           ----
           Net cash used in investing
            activities                       (162,674)      (214,216)

    CASH FLOWS FROM FINANCING
     ACTIVITIES
      Issuance of long-term debt               90,000        100,000
      Borrowings under revolving
       credit agreements                      213,129        276,218
      Repayments of revolving credit
       agreements                            (279,985)      (263,817)
      Issuance of common stock                  1,165          1,632
      Dividends on common stock               (32,121)       (30,394)
      Refundable deposits from
       generators for transmission
       network upgrades                        11,439         29,633
      Repayment of refundable
       deposits from generators for
       transmission network upgrades          (16,778)        (2,291)
      Other                                      (987)        (1,909)
                                                 ----         ------
           Net cash (used in) provided by
            financing activities              (14,138)       109,072
                                              -------        -------

    NET INCREASE IN CASH AND CASH
     EQUIVALENTS                                6,586          3,272

    CASH AND CASH EQUIVALENTS -
     Beginning of period                       74,853         58,110
    CASH AND CASH EQUIVALENTS - End
     of period                                $81,439        $61,382
                                              =======        =======




SOURCE ITC Holdings Corp.

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