ITC Holdings Corp. Reports Increased Earnings for the Fourth Quarter and Year

Feb 25, 2009

NOVI, Mich., Feb 25, 2009 /PRNewswire via COMTEX News Network/ -- 2008 Net Income Increased Over 48% Compared to 2007

Highlights

- Net income for the fourth quarter of $27.0 million, or $0.54 per diluted share

-Net income for full year of $109.2 million, or $2.19 per diluted share

- Capital investments for the year for ITCTransmission, METC and ITC Midwest of $121.8 million, $121.1 million and $156.5 million, respectively

- Initial 2009 EPS guidance of $2.20 to $2.30

- Initial 2009 guidance for capital investments of $270-325 million

NOVI, Mich., Feb. 25 /PRNewswire-FirstCall/ -- ITC Holdings Corp. (NYSE: ITC) today announced its fourth quarter results for the period ended December 31, 2008. Net income for the quarter was $27.0 million, or $0.54 per diluted share, compared to $15.6 million, or $0.36 per diluted share for the fourth quarter of 2007. Net income for the full year was $109.2 million, or $2.19 per diluted share, compared to $73.3 million, or $1.68 per diluted share in 2007.

Net Income for the year was higher than earnings guidance of $2.10 to $2.12 mainly due to an increase in rate base assets and an increase in allowance for funds used during construction (AFUDC) as a result of higher than expected capital expenditures in the fourth quarter.

"ITC had an excellent quarter and year in spite of the difficult financial markets and a slowing economy," said Joseph L. Welch, chairman, president and CEO of ITC. "This is a testament to ITC's predictable and stable business model that is enabling us to achieve our goal of investing in the transmission grid to improve reliability and provide access to dependable, non-discriminatory, competitive and low-cost energy. We enter 2009 with great enthusiasm as we move closer to realizing our vision of the high voltage transmission infrastructure build-out needed to support the nation's emerging energy policy of facilitating access to renewable energy resources, reducing our dependence on foreign oil and reducing carbon emissions."

In the fourth quarter of 2008, ITCTransmission invested $30.5 million, METC $35.7 million and ITC Midwest $46.1 million in their respective transmission systems. For the twelve month period, ITCTransmission, METC and ITC Midwest's respective investments were $121.8 million, $121.1 million and $156.5 million.

    (in thousands, except share and per share data)

                               Fourth quarter ended      Twelve months ended
                                     December 31,            December 31,
                                  2008        2007        2008        2007

    OPERATING REVENUES        $152,068    $109,400    $617,877    $426,249

    NET INCOME                 $26,981     $15,642    $109,208     $73,296

    DILUTED EPS                  $0.54       $0.36       $2.19       $1.68

    CAPITAL INVESTMENTS       $112,300     $75,800    $399,400    $286,200

In 2008 ITC Midwest interconnected 810 MW of renewable wind energy which represents 10% of all wind that was interconnected in 2008. This helped Iowa surpass California as the state with the second greatest amount of wind energy capacity.

"When we bought ITC Midwest we knew we were positioning ITC to play a large role in the interconnection of renewable resources into the electric grid," said Welch. "It's rewarding to see how the independent transmission model has made a positive impact for integrating renewable energy into the grid."

In December of 2008, ITC completed private placement financings at two of its subsidiaries, METC and ITC Midwest. METC issued $50.0 million of Senior Secured Notes and ITC Midwest issued $75.0 million of First Mortgage Bonds. These financings will enable METC and ITC Midwest to complete their 2009 capital expenditure plans. The success of these issuances demonstrates that ITC continues to have access to capital even in difficult financial markets.

Net Income for the fourth quarter increased by $11.3 million and for the full year by $35.9 million, compared to 2007. Key drivers that contributed to the results include:

    --  Increased income from ITC Midwest in 2008 as a result of  the
        acquisition of the Interstate Power and Light Company (IPL) transmission
        assets in December of 2007
    --  Higher rate base at ITCTransmission and METC
    --  Higher financing costs at ITC Holdings Corp. to fund the acquisition of
        the IPL transmission assets and to fund capital expenditures
    --  Lower earnings per share due to higher weighted average diluted shares
        outstanding
    --  Higher development expenses at ITC Great Plains and ITC Grid Development

Guidance for 2009

For 2009, earnings per diluted share are expected to be between $2.20 and $2.30. Capital investments for 2009 are expected to be approximately $70-$85 million, $110-$130 million and $90-$110 million for ITCTransmission, METC and ITC Midwest, respectively.

Fourth Quarter 2008 Financial Results Detail

ITC reported operating revenues of $152.1 million for the fourth quarter 2008, an increase of $42.7 million from 2007. Network revenues increased by $37.9 million due to the December 2007 acquisition by ITC Midwest of the electric transmission assets of IPL. METC and ITCTransmission also recognized total additional network revenues of $1.9 million mainly due to higher net revenue requirement as a result of higher rate base, operating expenses and taxes, among other items. Point-to-point, scheduling, control and dispatch revenues increased due primarily to an additional $1.3 million of ITC Midwest revenues. Regional cost sharing revenues, which became applicable during 2008, were $3.6 million for the fourth quarter of 2008.

Operation & maintenance (O&M) expenses of $26.2 million were $7.3 million higher in the fourth quarter of 2008 compared to the same period in 2007. O&M expenses increased due primarily to expenses incurred by ITC Midwest that were not included in our results of operations for the three months ended December 31, 2007.

General and administrative (G&A) expenses of $21.3 million for the fourth quarter of 2008 were $0.2 million lower than the same period in 2007.

Depreciation and amortization expenses increased by $7.1 million in the fourth quarter of 2008 compared to the fourth quarter of 2007. ITC Midwest recognized additional depreciation expenses of $5.2 million in the quarter. Depreciation and amortization expenses also increased at ITCTransmission and METC due to a higher depreciable asset base resulting from property, plant and equipment additions.

Taxes other than income taxes in the quarter increased compared to 2007 due to property tax expenses at ITC Midwest of $1.4 million in the fourth quarter of 2008. Additionally, property tax expenses at both ITCTransmission and METC increased by $0.8 million due primarily to ITCTransmission and METC's capital additions, which are included in the assessments for 2008 personal property taxes. Partially offsetting these increases was a decrease of $1.1 million as a result of the replacement of the Michigan Single Business Tax.

For fourth quarter of 2008, interest expense increased by $8.3 million compared to 2007, due primarily to higher borrowing levels to finance our capital expenditures and to finance the ITC Midwest asset acquisition.

Full Year 2008 Financial Results Detail

Operating revenues for the full year 2008 were $617.9 million, an increase of $191.6 million compared to 2007. Network revenues increased by $133.5 million as a result of the acquisition by ITC Midwest of the IPL electric transmission assets. ITCTransmission and METC also recognized additional network revenues of $18.6 million and $16.5 million, respectively, due to a higher net revenue requirement as a result of higher rate base, operating expenses and taxes, among other items. Point-to-point, scheduling, control and dispatch revenues increased due primarily to the addition of $6.3 million of ITC Midwest revenues. Regional cost sharing revenues, which became applicable during 2008, were $15.5 million for year.

For the twelve months ended December 31, 2008, O&M expenses of $113.8 million were $32.4 million higher than for the same period in 2007. O&M expenses increased by $27.6 million due to amounts incurred by ITC Midwest in 2008 that were not included in results for 2007. Further, METC incurred additional vegetation management expenses of $6.9 million.

G&A expenses of $81.3 million in 2008 were $19.2 million higher than for the same period in 2007. G&A expenses increased $14.0 million due primarily to increased personnel, higher business expenses and professional advisory and consulting services, mainly as a result of the acquisition of IPL transmission assets. Also, G&A expenses increased by $4.2 million at ITC Grid Development and ITC Great Plains subsidiaries for salaries, benefits and general business expenses due to increased development activities during 2008.

Depreciation and amortization expenses increased $26.8 million in 2008 compared to 2007. ITC Midwest recognized depreciation expenses of $18.6 million for the year. Depreciation and amortization expenses also increased at ITCTransmission and METC due primarily to a higher depreciable asset base resulting from property, plant and equipment additions.

For the full year 2008, taxes other than income taxes increased due to property tax expenses at ITC Midwest of $6.2 million. Additionally, property tax expenses at both ITCTransmission and METC increased by $3.9 million due primarily to ITCTransmission and METC's capital additions, which are included in the assessments for 2008 personal property taxes. Partially offsetting these increases was a decrease of $2.7 million as a result of the replacement of the Michigan Single Business Tax.

During 2008 METC sold a building resulting in a $0.5 million loss and ITCTransmission sold a permanent easement of land for a gain of $1.4 million.

For the full year 2008, interest expense increased by $40.4 million, due primarily to higher borrowing levels to finance our capital expenditures and to finance the ITC Midwest asset acquisition.

Fourth Quarter Conference Call

ITC will conduct a conference call to discuss fourth quarter and full year 2008 earnings results at 11 a.m. ET February 26, 2009. Joseph L. Welch, chairman, president and CEO, will provide a business overview and Edward M. Rahill, senior vice president and CFO will discuss the financial results of the fourth quarter and full year of 2008. Individuals wishing to participate in the conference call may dial toll-free (877) 874-1565 (domestic) or (719) 325-4780 (international); there is no passcode. The conference call replay, available through March 5, 2009 can be accessed by dialing toll-free (888) 203-1112 (domestic) or (719) 457-0820 (international), passcode 9787241. 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 2008 full year results may be found in ITC's Form 10-K filing. Once filed with the Securities and Exchange Commission, an electronic copy of our 10-K can be found at our website, https://www.itc-holdings.com/itc/about-us/fixed-income-investors. 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, improve access to markets, and lower the overall cost of delivered energy. ITC is the largest independent electricity transmission company in the country. Through its subsidiaries, ITCTransmission, Michigan Electric Transmission Company, LLC (METC) and ITC Midwest LLC, ITC operates regulated, high-voltage transmission systems in Michigan's Lower Peninsula and portions of Iowa, Minnesota, Illinois and Missouri serving a combined peak load in excess of 25,000 megawatts. ITC is also focused on new areas where significant transmission system improvements are needed through subsidiaries ITC Grid Development, ITC Great Plains and ITC Panhandle Transmission. 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 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, except share and per share data)

                                 Three months ended       Twelve months ended
                                    December 31,               December 31,

                                    2008        2007        2008        2007

    OPERATING REVENUES          $152,068    $109,400    $617,877    $426,249

    OPERATING EXPENSES

     Operation and maintenance    26,190      18,912     113,818      81,406
     General and administrative   21,313      21,487      81,296      62,089
     Depreciation and
      amortization                25,130      18,035      94,769      67,928
     Taxes other than
      income taxes                 9,430       8,251      41,180      33,340
     Other operating income and
      expenses-net                   121        (688)       (809)       (688)
        Total operating expenses  82,184      65,997     330,254     244,075

    OPERATING INCOME              69,884      43,403     287,623     182,174

    OTHER EXPENSES (INCOME)

     Interest expense             30,971      22,707     122,234      81,863
     Allowance for equity funds
      used during construction    (3,558)     (2,953)    (11,610)     (8,145)
     Loss on extinguishment of
      debt                             -           -           -         349
     Other income                 (1,502)       (609)     (3,415)     (3,457)
     Other expense                 1,012         774       3,944       1,618
        Total other expenses
         (income)                 26,923      19,919     111,153      72,228

    INCOME BEFORE INCOME TAXES    42,961      23,484     176,470     109,946

    INCOME TAX PROVISION          15,980       7,842      67,262      36,650

    NET INCOME                   $26,981     $15,642    $109,208     $73,296


    Basic earnings per share       $0.55       $0.37       $2.25       $1.73
    Diluted earnings per share     $0.54       $0.36       $2.19       $1.68

    Weighted-average
     basic shares             49,072,489  42,458,741  48,605,951  42,298,478
    Weighted-average
     diluted shares           50,118,493  43,740,368  49,770,681  43,541,306

    Dividends declared
     per common share             $0.305      $0.290      $1.190      $1.130




    ITC HOLDINGS CORP. AND SUBSIDIARIES
    CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
    (in thousands, except share data)


    ASSETS                                      December 31,   December 31,
    Current assets                                     2008           2007
     Cash and cash equivalents                      $58,110         $2,616
     Accounts receivable                             57,638         40,919
     Inventory                                       25,077         26,315
     Deferred income taxes                                -          2,689
     Regulatory assets - Attachment O
      revenue accrual (including accrued
       interest of $1,637)                           22,301              -
     Other                                            4,147          3,518
               Total current assets                 167,273         76,057

     Property, plant and equipment (net of
      accumulated depreciation and amortization
       of $925,890 and $879,843, respectively)    2,304,386      1,960,433
    Other assets
     Goodwill                                       951,319        959,042
     Intangible assets (net of accumulated
      amortization of $6,050 and $3,025,
       respectively)                                 52,357         55,382
     Regulatory assets- Attachment O revenue
      accrual (including accrued interest of
       $1,512 and $552, respectively)                81,643         20,537
     Regulatory assets- Acquisition adjustments
      (net of accumulated amortization of
        $22,393 and $17,004, respectively)           80,665         86,054
     Other regulatory assets                         39,848         29,449
     Deferred financing fees (net of accumulated
      amortization of $8,048 and $5,138,
       respectively)                                 21,410         14,201
     Other                                           15,664         12,142
               Total other assets                 1,242,906      1,176,807
    TOTAL ASSETS                                 $3,714,565     $3,213,297

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities
     Accounts payable                               $79,403        $47,627
     Accrued payroll                                 10,331          8,928
     Accrued interest                                37,779         23,088
     Accrued taxes                                   18,104         15,065
     Deferred income taxes                            6,476              -
     ITC Midwest's acquisition additional
      purchase price accrual                              -          5,402
     Refundable deposits from generators
      for transmission network upgrades               8,701          2,352
     Other                                            5,384          3,965
               Total current liabilities            166,178        106,427
    Accrued pension and postretirement
     liabilities                                     24,295         13,934
    Deferred income taxes                           144,889         90,617
    Regulatory liabilities                          196,656        189,727
    Other                                             5,231          6,093
    Long-term debt                                2,248,253      2,243,424
    STOCKHOLDERS' EQUITY
       Common stock, without par value,
        100,000,000 shares  authorized,
         49,654,518 and 42,916,852 shares
        issued and outstanding at December
        31, 2008 and 2007, respectively             848,624        532,103
    Retained earnings                                81,268         31,864
    Accumulated other comprehensive loss               (829)          (892)
                Total stockholders' equity          929,063        563,075
    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $3,714,565     $3,213,297




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

                                                       Twelve months ended
                                                           December 31,
                                                      2008              2007

    CASH FLOWS FROM OPERATING ACTIVITIES
    Net income                                    $109,208           $73,296

    Adjustments to reconcile net income to
     net cash provided by  operating activities:
        Depreciation and amortization expense       94,769            67,928
        Attachment O revenue accrual, including
         accrued interest                          (83,390)          (20,325)
        Deferred income tax expense                 65,054            36,650
        Allowance for equity funds used
         during construction                       (11,610)           (8,145)
        Other                                       10,370             6,622
        Changes in assets and liabilities,
         exclusive of changes shown separately:     11,020           (20,242)
               Net cash provided by operating
                 activities                        195,421           135,784

    CASH FLOWS FROM INVESTING ACTIVITIES

        Expenditures for property, plant and
         equipment                                (401,840)         (287,170)
        ITC Midwest's asset acquisition purchase
         price                                      (4,714)         (783,113)
        ITC Midwest's asset acquisition direct fees (1,008)          (11,377)
        Other                                        6,242             6,130
               Net cash used in investing
                activities                        (401,320)       (1,075,530)

    CASH FLOWS FROM FINANCING ACTIVITIES
        Issuance of long-term debt                 782,782           865,000
        Repayment of long-term debt               (765,000)                -
        Borrowings under ITC Holdings' Term
         Loan Agreement                                  -            25,000
        Repayment of ITC Holdings' Term Loan
         Agreement                                       -           (25,000)
        Borrowings under revolving credit
         agreements                                657,733           678,200
        Repayments of revolving credit
         agreements                               (670,999)         (562,200)
        Issuance of common stock                   310,543             3,402
        Dividends on common stock                  (58,935)          (48,168)
        Refundable deposits from generators for
         transmission network upgrades              15,661                 -
        Repayment of refundable deposits from
         generators for transmission network
          upgrades                                  (2,352)                -
        Debt issuance costs                         (7,159)           (5,409)
        Other                                         (881)           (1,889)
               Net cash provided by financing
                activities                         261,393           928,936

    NET INCREASE/(DECREASE)IN CASH AND CASH
     EQUIVALENTS                                    55,494           (10,810)

    CASH AND CASH EQUIVALENTS -
     Beginning of period                             2,616            13,426

    CASH AND CASH EQUIVALENTS -
     End of period                                 $58,110            $2,616

SOURCE ITC Holdings Corp.

http://www.itc-holdings.com

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