ITC Holdings Reports Increased First Quarter 2010 Results

Apr 28, 2010

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

  • First quarter net income of $34.2 million, or $0.67 per diluted common share
  • Capital investments of $99.5 million for the three months ended March 31, 2010
  • Reaffirmed 2010 EPS guidance of $2.60 to $2.70 per common share and capital expenditure guidance of $405 million to $460 million
    (in thousands, except per share
     data)                                   Three months ended
                                             ------------------
                                                  March 31,
                                                  ---------
                                              2010           2009
                                              ----           ----
    OPERATING REVENUES                    $161,288       $155,941

    NET INCOME                             $34,204        $28,725

    DILUTED EPS                              $0.67          $0.57

    CAPITAL INVESTMENTS                    $99,465        $85,155



ITC Holdings Corp. (NYSE: ITC) today announced its first quarter results for the period ended March 31, 2010. Net income for the quarter was $34.2 million, or $0.67 per diluted common share, compared to $28.7 million, or $0.57 per diluted common share for the first quarter of 2009.

For the three months ended March 31, 2010, ITC invested $99.5 million in capital projects at its operating companies, including $14.2 million, $31.2 million, $52.5 million and $1.6 million at ITCTransmission, METC, ITC Midwest and ITC Great Plains, respectively.

"We are very pleased to begin 2010 with another quarter of strong financial results," said Joseph L. Welch, chairman, president and CEO of ITC. "In this, the first year of our five year $3 billion capital investment program, we remain focused on delivering on the commitments we have made that will benefit our customers and shareholders. Our investment plan will improve energy delivery, reliability and efficiency, and allow for the interconnection of new renewable resources which is consistent with our strategic vision of leading the development of a 21st century transmission system in the United States."

Reported net income for the first quarter of 2010 increased $5.5 million, or $0.10 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 due to higher rate base and Allowance for Equity Funds Used During Construction (AFUDC) at all operating companies.
  • Higher net income due to lower non-recoverable expenses.
  • These increases in income were partially offset by higher interest expense resulting from our recently completed financing activities for ITC Holdings.

EPS and Capital Expenditure Guidance

For 2010, ITC is maintaining its earnings per diluted common share guidance of $2.60 to $2.70, as previously disclosed. Capital investment guidance for 2010 is also being maintained at approximately $405 to $460 million, including $50 to $60 million, $140 to $155 million, $205 to $225 million and $10 to $20 million for ITCTransmission, METC, ITC Midwest and ITC Great Plains, respectively.

First Quarter 2010 Financial Results Detail

ITC's operating revenues for the quarter increased to $161.3 million from $155.9 million last year. This increase was a result of higher network revenues mainly attributable to higher rate base at our regulated operating subsidiaries. Regional cost sharing revenues increased as well, due primarily to capital projects placed in-service that have been identified by the Midwest Independent Transmission System Operator, Inc. as eligible for regional cost sharing. In addition, other revenues increased at METC due to revenue recognized for utilization of jointly owned transmission lines.

Operation & maintenance expenses of $23.7 million were relatively flat as compared to the first quarter of 2009.

General and administrative expenses of $17.8 million were $2.1 million lower during the first quarter of 2010 compared to the same period in 2009 mainly due to lower professional advisory and consulting services and information technology support. These reductions were partially offset by higher expenses due to personnel additions.

Depreciation and amortization expenses decreased by $4.4 million during the first quarter of 2010 compared to the same period in 2009. This decrease was due primarily to the Federal Energy Regulatory Commission approval in September 2009 and December 2009 of depreciation studies for ITCTransmission and METC, respectively, which revised depreciation rates used to calculate depreciation expense for both operating companies. These changes were recorded in the third and fourth quarters of 2009, respectively. The effect of the changes in depreciation rates on net income and earnings per share amounts in the quarter is insignificant. 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 increased by $3.4 million for the three months ended March 31, 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 three months ended March 31, 2010 was 36.3 percent compared to 37.1 percent in the first quarter of 2009. The rate is lower mainly due to a reduction of income tax expense relating to the favorable resolution of an uncertain tax position in the first quarter of 2010 upon completion of the Internal Revenue Service audit of our 2006 tax year.

First quarter Conference Call

ITC will conduct a conference call to discuss 2010 first quarter earnings results at 11:00 a.m. ET on April 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 first quarter 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 May 13, 2010 can be accessed by dialing toll-free (800) 642-1687 (domestic) or (706) 645-9291 (international), passcode 67791836. 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 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 2010 first quarter 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, https://www.itc-holdings.com/itc/about-us/fixed-income-investors. Written copies can also be obtained 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, International Transmission Company (dba ITCTransmission), Michigan Electric Transmission Company, LLC (METC) and ITC Midwest LLC, ITC operates contiguous, 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, LLC, ITC Great Plains, LLC and ITC Panhandle Transmission, LLC. 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, except            Three months
     per share data)                     ended
                                      ------------
                                       March 31,
                                       ---------


                                   2010         2009
                                   ----         ----

    OPERATING REVENUES         $161,288     $155,941

    OPERATING EXPENSES

      Operation and
       maintenance               23,729       23,741
      General and
       administrative            17,781       19,893
      Depreciation and
       amortization              22,115       26,548
      Taxes other than income
       taxes                     12,308       11,098
      Other operating income
       and expense - net              7            -
                                    ---          ---
         Total operating
          expenses               75,940       81,280


    OPERATING INCOME             85,348       74,661

    OTHER EXPENSES (INCOME)

      Interest expense           35,029       31,593
      Allowance for equity
       funds used during
       construction              (3,143)      (2,766)
      Other income                 (626)        (683)
      Other expense                 384          864
                                    ---          ---
         Total other expenses
          (income)               31,644       29,008


    INCOME BEFORE INCOME
     TAXES                       53,704       45,653

    INCOME TAX PROVISION         19,500       16,928
                                 ------       ------

    NET INCOME                  $34,204      $28,725
                                =======      =======


    Basic earnings per
     common share                 $0.68        $0.58
    Diluted earnings per
     common share                 $0.67        $0.57

    Dividends declared per
     common share               $0 .320       $0.305




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

    (in thousands, except
     share data)
                                                 March         December
                                                  31,             31,
      ASSETS                                        2010            2009
                                                    ----            ----

      Current assets
      Cash and cash equivalents                  $67,069         $74,853
      Accounts receivable                         67,577          72,352
      Inventory                                   38,054          36,834
      Deferred income taxes                       26,261          23,859
    Regulatory assets -
     revenue accrual
     (including accrued
     interest of $2,238 and
     $2,652, respectively)                        68,533        82,871
       Other                                       5,176           3,244
                                                   -----           -----
                 Total current assets            272,670         294,013
    Property, plant and
     equipment (net of
     accumulated depreciation
     and amortization of
     $1,070,403   and
     $1,051,045, respectively)                 2,608,977     2,542,064
    Other assets
      Goodwill                                   950,163         950,163
      Intangible assets (net of
       accumulated amortization
       of $9,865 and $9,095,
       respectively)                              51,296          51,987
      Regulatory assets -
       revenue accrual
       (including accrued
       interest of $84 and $75,
       respectively)                              24,550        20,406
      Other regulatory assets                    134,853         134,924
      Deferred financing fees
       (net of accumulated
       amortization of $9,759
       and $9,616, respectively)                  21,230          21,672
      Other                                       13,854          14,487
                                                  ------          ------
              Total other assets               1,195,946       1,193,639
                                               ---------       ---------
    TOTAL ASSETS                              $4,077,593      $4,029,716
                                              ==========      ==========
    LIABILITIES AND
     STOCKHOLDERS' EQUITY
    Current liabilities
      Accounts payable                           $47,571         $43,508
      Accrued payroll                              6,327          13,648
      Accrued interest                            23,979          39,099
      Accrued taxes                               16,012          21,188
      Refundable deposits from
       generators for
       transmission network
       upgrades                                   37,667          25,891
      Other                                        6,518           3,344
                                                   -----           -----
                 Total current liabilities       138,074         146,678
    Accrued pension and
     postretirement
     liabilities                                  32,835          31,158
    Deferred income taxes                        277,457         255,516
    Regulatory liabilities -
     revenue deferral
     (including accrued
     interest of $215 and
     $186, respectively)                          10,238        10,238
    Regulatory liabilities -
     accrued asset removal
     costs                                       112,096         112,430
    Refundable deposits from
     generators for
     transmission network
     upgrades                                      6,978          17,664
    Other                                         11,470          10,111
    Long-term debt                             2,455,578       2,434,398
    STOCKHOLDERS' EQUITY
    Common stock, without par
     value, 100,000,000 shares
     authorized, 50,140,266
     and 50,084,061 shares
     issued and outstanding at
     March 31, 2010 and
     December 31, 2009,
     respectively                                865,672       862,512
      Retained earnings                          167,944         149,776
      Accumulated other
       comprehensive loss                           (749)           (765)
                                                    ----            ----
                 Total stockholders' equity    1,032,867       1,011,523
                                               ---------       ---------
    TOTAL LIABILITIES AND
     STOCKHOLDERS' EQUITY                     $4,077,593      $4,029,716
                                              ==========      ==========




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

    (in thousands)
                                               Three months
                                                ended March
                                                      31,
    CASH FLOWS FROM OPERATING
     ACTIVITIES                                  2010           2009

    Net income                                $34,204        $28,725
    Adjustments to reconcile net
     income to net cash provided
     by operating activities:
      Depreciation and amortization
       expense                               22,115         26,548
      Revenue accrual and deferral
       - including accrued interest          13,577         (6,376)
      Deferred income tax expense            17,808         16,245
      Allowance for equity funds
       used during construction              (3,143)        (2,766)
      Other                                   2,503          2,333
      Changes in assets and
       liabilities, exclusive of
       changes shown separately:
        Accounts receivable                   4,775         (2,314)
        Inventory                            (1,220)        (4,345)
        Other current assets                 (1,932)        (2,447)
        Accounts payable                     (7,093)          (941)
        Accrued
         payroll                             (5,086)        (4,588)
        Accrued interest                    (15,120)       (22,118)
        Accrued taxes                        (4,971)        (1,642)
        Other current
         liabilities                           (208)        (2,537)
        Other non-current assets and
         liabilities, net                     1,545          1,699
               Net cash provided
               by operating
               activities                  57,754         25,476
    CASH FLOWS FROM INVESTING
     ACTIVITIES
    Expenditures for property,
     plant and equipment                    (71,816)      (104,687)
    ITC Midwest's asset
     acquisition direct fees                    (89)             -
               Net cash used in
               investing
               activities                 (71,905)      (104,687)
    CASH FLOWS FROM FINANCING
     ACTIVITIES
    Issuance of long-term debt               40,000              -
    Borrowings under revolving
     credit agreements                      142,104        142,771
    Repayments of revolving
     credit agreements                     (161,041)       (99,792)
    Issuance of common stock                    574          1,031
    Dividends on common stock               (16,034)       (15,169)
    Refundable deposits from
     generators for transmission
     network upgrades                         3,957         21,516
    Repayment of refundable
     deposits from generators for
     transmission network
     upgrades                                (2,866)        (2,291)
    Other                                      (327)          (142)
               Net cash provided
               by financing
               activities                   6,367         47,924
    NET DECREASE IN CASH AND CASH
     EQUIVALENTS                             (7,784)       (31,287)
    CASH AND CASH EQUIVALENTS -
     Beginning of period                     74,853         58,110
    CASH AND CASH EQUIVALENTS -
     End of period                          $67,069        $26,823




SOURCE ITC Holdings Corp.

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