ITC Holdings Reports Increased First Quarter 2011 Results

Apr 27, 2011

NOVI, Mich., April 27, 2011 /PRNewswire/ --

Highlights

  • Net income for the first quarter of $42.0 million, or $0.81 per diluted common share
  • Capital investments of $128.9 million for the three months ended March 31, 2011
  • Reaffirmed 2011 earnings per share guidance of $3.20 to $3.30 per share and capital expenditure guidance of $560 to $640 million

 

ITC Holdings Corp. (NYSE: ITC) today announced its first quarter results for the period ended March 31, 2011. Net income for the quarter was $42.0 million, or $0.81 per diluted common share, compared to $34.2 million, or $0.67 per diluted common share for the first quarter of 2010.

For the three months ended March 31, 2011, ITC invested $128.9 million in capital projects at its operating companies, including $14.6 million, $33.7 million, $67.7 million and $12.9 million at ITCTransmission, METC, ITC Midwest and ITC Great Plains, respectively.

"We remain very pleased with our overall performance and execution," said Joseph L. Welch , chairman, president and CEO of ITC. "During the first quarter of 2011, we made solid progress in advancing our capital investment program that is expected to deliver value to both our customers and shareholders. In addition, we remain encouraged by the continued positive momentum around the regulatory and policy reforms critical to supporting regional transmission expansion, which further underscores our confidence in our long-term capital investment plans."

Reported net income for the first quarter of 2011 increased $7.8 million, or $0.14 per diluted common share, compared to the same period in 2010. Key drivers that contributed to year-over-year variances for the quarter include:

  • Higher net income due to higher rate base at all operating companies.
  • An increase in net income of $1.3 million due to the recognition of a regulatory asset associated with the Kansas V-Plan project.
  • These increases in net income for the quarter were partially offset by higher interest expense resulting from higher borrowing levels to finance capital expenditures.

EPS and Capital Expenditure Guidance

For 2011, ITC is reaffirming its full year earnings per share guidance of $3.20 to $3.30. Capital investment guidance for 2011 is also being maintained at $560 to $640 million, which includes $60 to $75 million, $155 to $170 million, $225 to $250 million and $120 to $145 million for ITCTransmission, METC, ITC Midwest and ITC Great Plains, respectively.

First Quarter 2011 Financial Results Detail

ITC's operating revenues for the first quarter increased to $179.4 million from $161.3 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 and higher recoverable expenses associated with operation and maintenance expenses. In addition, the increase resulted from higher regional cost sharing revenues due primarily to additional capital projects that have been identified by the Midwest ISO and the Southwest Power Pool as eligible for regional cost sharing. These increases in revenues were partially offset by lower point-to-point revenues resulting from a decrease in scheduled transmission flow over our transmission systems.

Operation and maintenance expenses of $26.3 million were $2.6 million higher during the first quarter of 2011 compared to the same period in 2010. This increase was primarily due to higher vehicle and equipment expenses, due in part to higher fuel costs, as well as higher field operations expense and additional field relay maintenance activity.

General and administrative (G&A) expenses of $16.6 million were $1.2 million lower compared to the same period in 2010. This decrease was primarily due to the recognition of a regulatory asset associated with development and pre-construction costs for the Kansas V-Plan project which reduced G&A expenses by $1.9 million. This decrease was partially offset by higher development expenses in first quarter of 2011, largely associated with the Kansas V-Plan project, prior to the recognition of the regulatory asset.

Depreciation and amortization expenses of $23.1 million increased by $1.0 million during the first quarter of 2011 compared to the same period in 2010. This increase was primarily due to a higher depreciable asset base resulting from property, plant and equipment additions.

Taxes other than income taxes of $13.6 million were $1.3 million higher for the first quarter of 2011 compared to the same period in 2010. This increase was due to 2010 capital additions at our regulated operating subsidiaries, which are included in the tax base for 2011 personal property taxes.

Interest expense of $36.3 million for the first quarter of 2011 increased $1.2 million compared to the same period in 2010 due primarily to higher borrowing levels to finance capital expenditures.

The effective income tax rate for the first quarter of 2011 was 37.1 percent compared to 36.3 percent for the same period last year.

First Quarter Conference Call

ITC will conduct a conference call to discuss the first quarter results on Thursday, April 28, 2011 at 11 a.m. Eastern time. Joseph L. Welch, chairman, president and CEO, will provide a business overview, and Cameron M. Bready , executive vice president, treasurer and CFO, will discuss the financial results. Individuals wishing to participate in the conference call can dial toll-free 877-644-1296 (domestic) or 914-495-8555 (international); there is no passcode. A listen-only live webcast of the conference call, including accompanying slides and the earnings release, will be available on the company's investor information page at https://www.itc-holdings.com/itc/about-us/fixed-income-investors. The conference call replay, available through Tuesday, May 3, 2011, can be accessed by dialing toll-free 800-642-1687 (domestic) or 706-645-9291 (international), passcode 58450121. The webcast will also 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 2011 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 made available by contacting us either through our website or the phone numbers 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 currently operates high-voltage transmission systems and assets 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 further expansion in 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, except per share data)

Three months ended

 

March 31,

 

2011


2010

 

OPERATING REVENUES

$ 179,386


$161,288

 




 

OPERATING EXPENSES




 




 

Operation and maintenance

26,284


23,729

 

General and administrative

16,580


17,781

 

Depreciation and amortization

23,088


22,115

 

Taxes other than income taxes

13,608


12,308

 

Other operating income and expense — net

(149)


7

 

Total operating expenses

79,411


75,940

 




 

OPERATING INCOME

99,975


85,348

 




 

OTHER EXPENSES (INCOME)




 




 

Interest expense

36,277


35,029

 

Allowance for equity funds used during construction

(3,510)


(3,143)

 

Other income

(275)


(626)

 

Other expense

722


384

 

Total other expenses (income)

33,214


31,644

 




 

INCOME BEFORE INCOME TAXES

66,761


53,704

 




 

INCOME TAX PROVISION

24,759


19,500

 




 

NET INCOME

$ 42,002


$ 34,204

 




 

Basic earnings per common share

$ 0.83


$ 0.68

 

Diluted earnings per common share

$ 0.81


$ 0.67

 




 

Dividends declared per common share

$ 0.335


$ 0.320

 

 
      


 

 

ITC HOLDINGS CORP. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 




 

(in thousands)

Three Months Ended

 

March 31,

 

2011


2010

 

CASH FLOWS FROM OPERATING ACTIVITIES




 

Net income

$ 42,002


$ 34,204

 

Adjustments to reconcile net income to net cash provided by operating activities:




 

Depreciation and amortization expense

23,088


22,115

 

Recognition of and refund and collection of revenue accruals and deferrals — including accrued interest

(4,735)


13,577

 

Deferred income tax expense

16,796


17,808

 

Allowance for equity funds used during construction

(3,510)


(3,143)

 

Other

2,950


2,503

 

Changes in assets and liabilities, exclusive of changes shown separately:




 

Accounts receivable

12,612


4,775

 

Inventory

1,591


(1,220)

 

Other current assets

(1,325)


(1,932)

 

Accounts payable

(3,280)


(7,093)

 

Accrued payroll

(8,024)


(5,086)

 

Accrued interest

(19,937)


(15,120)

 

Accrued taxes

1,202


(4,971)

 

Other current liabilities

(3,418)


(208)

 

Other non-current assets and liabilities, net

1,504


1,545

 

Net cash provided by operating activities

57,516


57,754

 




 

CASH FLOWS FROM INVESTING ACTIVITIES




 

Expenditures for property, plant and equipment

(118,491)


(71,816)

 

Proceeds from sale of securities


14,576

 

Purchases of securities


(14,587)

 

Other

4


(78)

 

Net cash used in investing activities

(118,487)


(71,905)

 




 

CASH FLOWS FROM FINANCING ACTIVITIES




 

Issuance of long-term debt


40,000

 

Borrowings under revolving credit agreements

196,300


142,104

 

Repayments of revolving credit agreements

(155,200)


(161,041)

 

Issuance of common stock

8,995


574

 

Dividends on common stock

(17,007)


(16,034)

 

Refundable deposits from generators for transmission network upgrades

3,113


3,957

 

Repayment of refundable deposits from generators for transmission network upgrades

(4,876)


(2,866)

 

Other

(2,082)


(327)

 

Net cash provided by financing activities

29,243


6,367

 




 

NET DECREASE IN CASH AND CASH EQUIVALENTS

(31,728)


(7,784)

 




 

CASH AND CASH EQUIVALENTS — Beginning of period

95,109


74,853

 

b>CASH AND CASH EQUIVALENTS — End of period

$ 63,381


$ 67,069

 




 

 
    


SOURCE ITC Holdings Corp.


 

ITC HOLDINGS CORP. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)

 




 

(in thousands, except share data)

March 31,


December 31,

 

2011


2010

 

ASSETS




 

Current assets




 

Cash and cash equivalents

$ 63,381


$ 95,109

 

Accounts receivable

68,116


80,417

 

Inventory

40,695


42,286

 

Deferred income taxes

5,810


 

Regulatory assets revenue accruals, including accrued interest

22,486


28,637

 

Other

6,618


5,293

 

Total current assets

207,106


251,742

 




 

Property, plant and equipment (net of accumulated depreciation and

amortization of $1,143,068 and $1,129,669, respectively)

2,969,065


2,872,277

 

Other assets




 

Goodwill

950,163


950,163

 

Intangible assets (net of accumulated amortization of $12,952 and $12,176,

respectively)

49,209


49,985

 

Regulatory assets revenue accruals, including accrued interest

12,126


3,947

 

Other regulatory assets

140,059


138,152

 

Deferred financing fees (net of accumulated amortization of $12,493 and

$11,750, respectively)

20,762


19,949

 

Other

22,273


21,658

 

Total other assets

1,194,592


1,183,854

 

TOTAL ASSETS

$ 4,370,763


$ 4,307,873

 




 

LIABILITIES AND STOCKHOLDERS' EQUITY




 

Current liabilities




 

Accounts payable

$ 61,776


$ 66,953

 

Accrued payroll

8,337


18,606

 

Accrued interest

22,788


42,725

 

Accrued taxes

20,663


19,461

 

Regulatory liabilities — revenue deferrals, including accrued interest

24,052


17,658

 

Refundable deposits from generators for transmission network upgrades

12,698


10,492

 

Revolving credit agreements maturing within one year

24,400


 

Other

2,695


6,509

 

Total current liabilities

177,409


182,404

 




 

Accrued pension and postretirement liabilities

37,281


35,811

 

Deferred income taxes

340,703


314,979

 

Regulatory liabilities — revenue deferrals, including accrued interest

34,101


43,202

 

Regulatory liabilities — accrued asset removal costs

89,852


90,987

 

Refundable deposits from generators for transmission network upgrades

10,545


14,515

 

Other

12,209


11,646

 

Long-term debt

2,513,713


2,496,896

 




 

STOCKHOLDERS' EQUITY




 

Common stock, without par value, 100,000,000 shares authorized, 50,996,817 and 50,715,805 shares issued and outstanding at March 31, 2011 and December 31, 2010, respectively

898,601


886,808

 

Retained earnings

254,432


229,437

 

Accumulated other comprehensive income

1,917


1,188

 

Total stockholders' equity

1,154,950


1,117,433

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$ 4,370,763


$ 4,307,873

 

 
    

 


 

(in thousands, except per share data)

Three months ended
March 31,

 

2011


2010

 

OPERATING REVENUES

$ 179,386


$ 161,288

 




 

NET INCOME

$ 42,002


$ 34,204

 




 

DILUTED EPS

$ 0.81


$ 0.67

 




 

 
    

 

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