ITC Holdings Corp. Reports First Quarter 2007 Results

May 07, 2007

NOVI, Mich., May 7, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- ITC Holdings Corp. (NYSE: ITC) today announced its first quarter results for the period ended March 31, 2007. Net income for the quarter was $16.9 million, or $0.39 per diluted share, compared to $2.7 million, or $0.08 per diluted share for the first quarter of 2006.

"ITC is on track for another good year as we continue to deliver on our commitments to our customers and shareholders" said Joseph L. Welch, president and CEO of ITC. "ITCTransmission and METC's investments in Michigan's electric transmission grid continue to support our mission of increasing reliability for our customers and enabling access to competitive energy markets."

In the first quarter of 2007, ITC Transmission invested $47.5 million and METC invested $20.0 million in their respective transmission systems.

ITC reported operating revenues of $101.3 million for the first quarter 2007, an increase of $62.2 million over the comparable period last year. Network revenues increased by $27.6 million due to the inclusion of amounts for METC not included in the 2006 period. In addition, network revenues increased by $11.9 million due to increased billed network rates and $1.2 million due to higher loads at ITCTransmission in the first quarter of 2007 compared to the same period in 2006. In addition, operating revenues increased $17.1 million due to the Attachment O revenue accrual for both ITC Transmission and METC as a result of Forward-Looking Attachment O. Effective January 1, 2007, under Forward-Looking Attachment O, expenses are recovered on a current rather than lagging basis.

Operation & Maintenance (O&M) expenses of $18.5 million during the first quarter of 2007 were $11.9 million higher than the same period in 2006. This increase was mainly due to $11.4 million of O&M expenses incurred due to the inclusion of METC in the first quarter of 2007 for labor, transmission structure maintenance, vegetation management, site and general support costs, easement payments and transmission system monitoring and control expenses. O&M expenses increased at ITCTransmission by $0.6 million primarily as a result of additional vegetation management.

General and administrative (G&A) expenses of $15.0 million for the first quarter of 2007 were $7.5 million higher than the same period in 2006. Mainly as a result of the acquisition of METC, G&A expenses increased $6.2 million due to higher professional advisory and consulting services, business expenses and compensation and benefits. Additionally, G&A expenses at ITC increased by $1.3 million mainly due to the costs associated with the securities offering by International Transmission Holdings Limited Partnership and expenses at ITC Grid Development for salaries, benefits and general business expenses incurred during the first quarter of 2007.

Depreciation and amortization expenses increased in the three months ended March 31, 2007 compared to the same period in 2006 due to the acquisition of METC, which resulted in an additional $4.0 million of depreciation expense related to property, plant and equipment and $1.6 million due to the amortization of METC's regulatory assets and intangible assets associated with the METC ADIT deferral and regulatory asset deferral. In addition depreciation expense increased at ITCTransmission due to a higher depreciable asset base as a result of property, plant and equipment additions during the first quarter 2007 and the year ended 2006.

Taxes other than income taxes of $8.8 million in the first quarter of 2007 increased by $3.4 million compared to the same period in 2006. At ITCTransmission property taxes increased by $0.6 million in the first quarter of 2007 mainly due to 2006 capital additions, which are included in the assessments for 2007 personal property taxes. Additionally, METC incurred $2.1 million of property tax expense in the first quarter of 2007 which was not included in the same period in 2006. Taxes other than income taxes also increased by $0.6 million due to higher payroll taxes resulting from personnel additions.

In the first quarter of 2007 interest expense increased $11.9 million compared to the same period in 2006 primarily due to higher borrowing levels to finance our capital expenditures and the acquisition of METC.

Guidance for 2007

For 2007 earnings per diluted share are expected to be between $1.50 and $1.60, as previously disclosed. Capital expenditures for 2007 are expected to be approximately $190 million and $50 million for ITCTransmission and METC, respectively.

First Quarter Conference Call

ITC will conduct a conference call to discuss first quarter 2007 earnings results at 11:00 a.m. ET Monday, May 7, 2007. Joseph L. Welch, president and CEO, will provide a business overview and Edward M. Rahill, senior vice president and CFO, will provide a financial update of the first quarter of 2007. Individuals wishing to participate in the conference call may dial toll- free (866) 293-8972 (domestic) or (913) 312-1232 (international); there is no passcode. The conference call replay, available through May 16, 2007 can be accessed by dialing toll-free (888) 203-1112 (domestic) or (719) 457-0820 (international), passcode 1772834. Investors, the news media and the public may listen to a live internet broadcast of the meeting at https://www.itc-holdings.com/itc/about-us/fixed-income-investors. The webcast also will be archived on the ITC website at https://www.itc-holdings.com/itc/about-us/fixed-income-investors.

Other Available Information

More detail about the 2007 first quarter results may be found in ITC's Form 10-Q filing. Once filed with the SEC, an electronic copy of the 10-Q can be found at ITC Holdings Corp.'s website, https://www.itc-holdings.com/itc/about-us/fixed-income-investors. Printed copies can be obtained by contacting us either through our website or the phone listings below.

About ITC Holdings Corp.

ITC Holdings Corp. (NYSE: ITC) is in the business of electricity transmission infrastructure improvements as a means to improve electric reliability, reduce congestion and lower the overall cost of delivered energy. Through our operating subsidiaries, ITCTransmission and METC, we are the only publicly traded company engaged exclusively in the transmission of electricity in the United States. We are also the largest independent electric transmission company and the eighth largest electric transmission company in the country based on transmission load served. Our business strategy is to operate, maintain and invest in our transmission infrastructure in order to enhance system integrity and reliability and to reduce transmission constraints. By pursuing this strategy, we seek to reduce the overall cost of delivered energy for end-use consumers by providing them with access to electricity from the lowest cost electricity generation sources. ITCTransmission and METC operate contiguous, fully-regulated, high-voltage systems in Michigan's Lower Peninsula, an area with a population of approximately 9.8 million people, that transmit electricity to local electricity distribution facilities from generating stations throughout Michigan and surrounding areas. Subsidiary ITC Grid Development, LLC expects to focus on partnering with local entities and utilities in regions where significant transmission improvements are needed. The first region in which ITC Grid Development, LLC expects to focus its efforts is the Great Plains region, specifically in Kansas, through the formation of its subsidiary ITC Great Plains, LLC. For more information on ITC Holdings Corp., please visit http://www.itc-holdings.com. For more information on ITCTransmission or METC, please visit http://www.itctransco.com or http://www.metcllc.com, respectively. For more information on ITC Great Plains, please visit http://www.itcgreatplains.com. (itc-ITC)

Safe Harbor Statement

This press release contains certain statements that describe our management's beliefs concerning future business conditions 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 "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 other things 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. They 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, unless required by law.

 

    ITC HOLDINGS CORP. AND SUBSIDIARIES

    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

    (in thousands, except share and per share data)



                                                           Three months ended

                                                                March 31,

                                                          2007          2006



    OPERATING REVENUES                                $ 101,274       $39,069



    OPERATING EXPENSES



      Operation and maintenance                          18,540         6,657

      General and administrative                         15,023         7,477

      Depreciation and amortization                      16,122         8,870

      Taxes other than income taxes                       8,770         5,346

        Total operating expenses                         58,455        28,350



    OPERATING INCOME                                     42,819        10,719



    OTHER EXPENSES (INCOME)



      Interest expense                                   19,132         7,240

      Allowance for equity funds used during

       construction                                      (1,240)         (522)

      Loss on extinguishment of debt                        349             -

      Other income                                         (702)         (301)

      Other expense                                         333           150

        Total other expenses (income)                    17,872         6,567



    INCOME BEFORE INCOME TAXES                           24,947         4,152



    INCOME TAX PROVISION                                  8,092         1,499



    INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE

    IN ACCOUNTING PRINCIPLE                              16,855         2,653



    CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING

    PRINCIPLE (NET OF TAX OF $16)                             -            29



    NET INCOME                                          $16,855       $ 2,682



    Basic earnings per share                             $ 0.40        $ 0.08

    Diluted earnings per share                           $ 0.39        $ 0.08





    Weighted-average basic shares                    42,091,356    32,984,807

    Weighted-average diluted shares                  43,293,874    33,982,045



    Dividends declared per common share                 $0.2750       $0.2625









    ITC HOLDINGS CORP. AND SUBSIDIARIES

    CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)

    (in thousands, except share data)



    ASSETS                                            March 31,   December 31,

    Current assets                                       2007           2006

      Cash and cash equivalents                         $31,276       $13,426

      Restricted cash                                     4,634         4,565

      Accounts receivable                                36,953        35,325

      Inventory                                          36,641        25,408

      Deferred income taxes                              11,273        21,023

      Other                                               4,522         9,926

        Total current assets                            125,299       109,673



    Property, plant and equipment (net of

     accumulated depreciation and amortization

     of $619,178 and $608,956, respectively)          1,253,709     1,197,862

    Other assets

      Goodwill                                          623,338       624,385

      Intangible assets (net of accumulated

       amortization of $756 and $0, respectively)        57,651        58,407

      Regulatory assets- acquisition adjustment          90,095        91,443

      Other regulatory assets                            27,097        26,183

      Attachment O revenue accrual                       17,140              -

      Deferred financing fees (net of accumulated

       amortization of  $3,643 and $4,817, respectively) 13,778        14,490

      Other                                               6,978         6,354

        Total other assets                              836,077       821,262

    TOTAL ASSETS                                    $ 2,215,085   $ 2,128,797



    LIABILITIES AND STOCKHOLDERS' EQUITY

    Current liabilities

      Accounts payable                                  $38,999       $33,295

      Accrued payroll                                     2,835         5,192

      Accrued interest                                    7,418        18,915

      Accrued taxes                                       8,693        14,152

      METC rate case accrued liability                   20,000        20,000

      Other                                               6,292         8,012

        Total current liabilities                        84,237        99,566

    Accrued pension liability                             8,457         7,782

    Accrued postretirement liability                      3,768         3,268

    Deferred income taxes                                74,861        75,730

    Regulatory liabilities                              140,191       138,726

    Asset retirement obligation                           5,440         5,346

    Other                                                 4,241         3,857

    Long-term debt                                    1,356,514     1,262,278



    STOCKHOLDERS' EQUITY

    Common stock, without par value, 100,000,000

     shares authorized, 42,419,350 and 42,395,760

     shares issued and outstanding at March 31,

     2007 and December 31, 2006, respectively           526,401       526,485

    Retained earnings                                    11,914         6,714

    Accumulated other comprehensive loss                   (939)         (955)

        Total stockholders' equity                      537,376       532,244

    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY      $ 2,215,085   $ 2,128,797







    ITC HOLDINGS CORP. AND SUBSIDIARIES

    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

    (in thousands)



                                                            Three months ended

                                                                  March 31,

                                                          2007          2006

    CASH FLOWS FROM OPERATING ACTIVITIES

    Net income                                          $16,855        $2,682

    Adjustments to reconcile net income to net cash

     provided by operating activities:

      Depreciation and amortization expense              16,122         8,870

      Attachment O revenue accrual                      (17,140)            -

      Amortization of deferred financing fees

       and discount on long-term debt                       470           372

      Stock-based compensation expense                    1,127           583

      Loss on extinguishment of debt                        349             -

      Amortization of regulatory assets                     483           483

      Deferred income taxes                               8,881         1,412

      Other long-term liabilities                        1,559          1,518

      Other regulatory assets                           (1,114)             -

      Allowance for equity funds used during

      construction                                      (1,240)          (522)

      Other                                               (716)          (546)

      Changes in current assets and liabilities,

       exclusive of changes shown separately           (15,635)       (13,727)

          Net cash provided by operating activities     10,001          1,125



    CASH FLOWS FROM INVESTING ACTIVITIES

      Expenditures for property, plant and equipment   (73,788)       (28,709)

      Other                                                925              -

          Net cash used in investing activities        (72,863)       (28,709)



    CASH FLOWS FROM FINANCING ACTIVITIES

      Issuance of long-term debt                             -         99,890

      Borrowings under revolving credit facilities     235,900         11,700

      Repayments of revolving credit facilities       (141,700)       (70,000)

      Issuance of common stock                             341            118

      Dividends on common stock                        (11,655)        (8,731)

      Repurchase and retirement of common stock         (1,841)             -

      Debt issuance costs                                 (333)        (1,383)

          Net cash provided by financing activities      80,712        31,594



    NET INCREASE IN CASH AND CASH EQUIVALENTS            17,850         4,010



    CASH AND CASH EQUIVALENTS - Beginning of period      13,426        24,591



    CASH AND CASH EQUIVALENTS - End of period           $31,276       $28,601





 

SOURCE ITC Holdings Corp.

 

Investors-Analysts, Pat Wenzel +1-248-374-7200, pwenzel@itc-holdings.com, or Media,

Lisa Aragon +1-248-835-9300, laragon@itc-holdings.com. both of ITC Holdings Corp.

https://www.itc-holdings.com/itc/about-us/fixed-income-investors

 

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