ITC Holdings Reports Increased Second Quarter and Year-to-Date 2011 Results; Raises 2011 Earnings Per Share and Capital Guidance

Jul 27, 2011

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

Highlights

  • Net income for the second quarter of $43.0 million, or $0.83 per diluted common share
  • Net income for the six months ended June 30, 2011 of $85.0 million, or $1.64 per diluted common share
  • Capital investments of $271.6 million for the six months ended June 30, 2011
  • 2011 earnings per share guidance increased to $3.25 to $3.35 per share and capital expenditure guidance increased to $600 to $645 million

 

ITC Holdings Corp. (NYSE: ITC) today announced its second quarter and year-to-date results for the period ended June 30, 2011. Net income for the quarter was $43.0 million, or $0.83 per diluted common share, compared to $36.3 million, or $0.71 per diluted common share for the second quarter of 2010. Net income for the six months ended June 30, 2011 was $85.0 million, or $1.64 per diluted common share, compared to $70.5 million, or $1.38 per diluted common share for the same period last year.

For the six months ended June 30, 2011, ITC invested $271.6 million in capital projects at its operating companies, including $36.5 million, $66.0 million, $133.8 million and $35.3 million at ITCTransmission, METC, ITC Midwest and ITC Great Plains, respectively.

"ITC has continued to enjoy strong operational and financial performance during the first half of 2011, largely due to our relentless focus on execution," said Joseph L. Welch , chairman, president and CEO of ITC. "In addition, while we have been sustaining our track record of delivering on our near-term commitments, critical transmission policy reforms we have been advocating in the areas of planning and cost allocation have materialized with the issuance of FERC Order 1000. The reforms outlined in this order should serve to facilitate the development of more regional transmission infrastructure to support a 21st century transmission grid that is reliable, adaptable and capable of meeting our nation's long-term energy needs."

Reported net income for the second quarter of 2011 increased $6.7 million, or $0.12 per diluted common share, compared to the same period in 2010. For the six months ended June 30, 2011, net income increased $14.5 million, or $0.26 per diluted common share, compared to the same period last year. Key drivers that contributed to these results include:

  • Higher rate base and AFUDC at our operating companies resulting from our capital investments for the quarter and the year-to-date period,
  • A lower effective tax rate for the quarter and year-to-date period, and
  • An increase in net income $1.3 million for the year-to-date period associated with the recognition of a regulatory asset for development and pre-construction activities for the Kansas V-Plan project.

EPS and Capital Expenditure Guidance

For 2011, ITC is raising its full year earnings per share guidance to a range of $3.25 to $3.35, from the previous range of $3.20 to $3.30 per share. Capital investment guidance for 2011 is also increasing to a range of $600 to $645 million, from the prior range of $560 to $640 million. The updated guidance range includes $70 to $80 million, $155 to $165 million, $255 to $270 million and $120 to $130 million for ITCTransmission, METC, ITC Midwest and ITC Great Plains, respectively.

Second Quarter 2011 Financial Results Detail

ITC's operating revenues for the second quarter increased to $185.1 million from $168.5 million for the same period last year. This increase was primarily due to higher network revenues attributable to higher rate base at all of our regulated operating subsidiaries. In addition, the increase resulted from higher regional cost sharing revenues in 2011, primarily due to additional capital projects 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 $28.8 million during the second quarter of 2011 were largely consistent when compared to the same period in 2010.

General and administrative (G&A) expenses of $19.3 million were $1.9 million higher compared to the same period in 2010. This increase was primarily due to higher general business expenses, largely consisting of increased information technology support, and higher professional services.

Depreciation and amortization expenses of $23.4 million increased by $0.8 million during the second quarter of 2011 compared to the same period in 2010. This increase was primarily due to a higher depreciable base resulting from property, plant and equipment additions.

Taxes other than income taxes of $13.6 million were $1.9 million higher for the second quarter of 2011 compared to the same period in 2010. This increase was primarily due to the impact of 2010 capital additions at our regulated operating subsidiaries, which are included in the tax base for purposes of calculating 2011 personal property taxes.

Interest expense of $36.5 million increased by $1.2 million for the second quarter of 2011 compared to the same period in 2010, primarily due to higher borrowing levels to finance capital expenditures.

The effective income tax rate for the second quarter of 2011 was 35.6 percent compared to 36.8 percent the same period last year.

Year-To-Date 2011 Financial Results Detail

ITC's operating revenues for the six months ended June 30, 2011 increased to $364.5 million from $329.8 million for the same period last year. This increase was primarily due to higher network revenues attributable to higher rate base at all of our regulated operating subsidiaries and higher recoverable expenses primarily due to higher operating expenses. In addition, the increase resulted from higher regional cost sharing revenues in 2011, primarily due to additional capital projects that have been identified by MISO as eligible for regional cost sharing.

O&M expenses of $55.1 million were $2.9 million higher for the six months ended June 30, 2011 compared to the same period in 2010. This increase was a result of higher expenses associated with vehicles and equipment, due in part to higher fuel costs, relay maintenance activities, and operating and training expenses, partially offset by lower material costs.

G&A expenses of $35.9 million were $0.7 million higher compared to the same period in 2010. This increase was primarily due to higher general business expenses, largely consisting of increased information technology support, higher compensation expenses and higher outside services, partially offset by the recognition of the Kansas V-Plan project regulatory asset in the first quarter of 2011.

Depreciation and amortization expenses of $46.4 million increased by $1.8 million during the six months ended June 30, 2011 compared to the same period in 2010. This increase was primarily due to a higher depreciable base resulting from property, plant and equipment additions.

Taxes other than income taxes of $27.2 million were $3.2 million higher compared to the same period in 2010. This increase was due to the impact of 2010 capital additions at our regulated operating subsidiaries, which are included in the tax base for purposes of calculating 2011 personal property taxes.

Interest expense of $72.8 million increased $2.4 million in the first six months of 2011 compared to the same period in 2010, primarily due to higher borrowing levels to finance capital expenditures.

The effective income tax rate for the six months ended June 30, 2011 was 36.3 percent compared to 36.5 percent in 2010.

Second Quarter Conference Call

ITC will conduct a conference call to discuss the second quarter results on Thursday, July 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, August 2, 2011, can be accessed by dialing toll-free 855-859-2056 (toll-free) or 404-537-3406 (toll), passcode 83322776. 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 second quarter 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, https://www.itc-holdings.com/itc/about-us/fixed-income-investors. Written copies can also be made available by contacting us through our website.

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


Six months ended

 

June 30,


June 30,

 

2011


2010


2011


2010

 

OPERATING REVENUES

$ 185,098


$168,468


$ 364,484


$329,756

 








 

OPERATING EXPENSES






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Operation and maintenance

28,837


28,494


55,121


52,223

 

General and administrative

19,289


17,413


35,869


35,194

 

Depreciation and amortization

23,352


22,567


46,440


44,682

 

Taxes other than income taxes

13,556


11,626


27,164


23,934

 

Other operating (income) and expense — net

(167)


(530)


(316)


(523)

 

Total operating expenses

84,867


79,570


164,278


155,510

 








 

OPERATING INCOME

100,231


88,898


200,206


174,246

 








 

OTHER EXPENSES (INCOME)








 








 

Interest expense

36,484


35,333


72,754


70,362

 

Allowance for equity funds used during construction

(4,099)


(3,435)


(7,609)


(6,578)

 

Other income

(497)


(1,154)


(718)


(1,672)

 

Other expense

1,594


755


2,269


1,031

 

Total other expenses (income)

33,482


31,499


66,696


63,143

 








 

INCOME BEFORE INCOME TAXES

66,749


57,399


133,510


111,103

 








 

INCOME TAX PROVISION

23,753


21,098


48,512


40,598

 








 

NET INCOME

$ 42,996


$ 36,301


$ 84,998


$ 70,505

 








 

Basic earnings per common share

$ 0.84


$ 0.72


$ 1.67


$ 1.40

 

Diluted earnings per common share

$ 0.83


$ 0.71


$ 1.64


$ 1.38

 








 

Dividends declared per common share

$ 0.335


$ 0.320


$ 0.670


$ 0.640

 

 
         


 

 

ITC HOLDINGS CORP. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 




 

(in thousands)

Six months ended

 

June 30,

 

2011


2010

 

CASH FLOWS FROM OPERATING ACTIVITIES




 

Net income

$ 84,998


$ 70,505

 

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




 

Depreciation and amortization expense

46,440


44,682

 

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

18,116


46,676

 

Deferred income tax expense

31,421


35,191

 

Allowance for equity funds used during construction

(7,609)


(6,578)

 

Other

7,554


5,937

 

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




 

Accounts receivable

(16,036)


(13,911)

 

Inventory

2,537


(2,283)

 

Other current assets

(1,602)


(4,711)

 

Accounts payable

969


(1,410)

 

Accrued payroll

(5,143)


(3,421)

 

Accrued interest

304


5,420

 

Accrued taxes

10,292


5,996

 

Other current liabilities

(2,012)


681

 

Other non-current assets and liabilities, net

(2,444)


624

 

Net cash provided by operating activities

167,785


183,398

 




 

CASH FLOWS FROM INVESTING ACTIVITIES




 

Expenditures for property, plant and equipment

(228,028)


(162,585)

 

Proceeds from sale of securities

3,809


14,576

 

Purchases of securities

(7,160)


(14,587)

 

Other

578


(78)

 

Net cash used in investing activities

(230,801)


(162,674)

 




 

CASH FLOWS FROM FINANCING ACTIVITIES




 

Issuance of long-term debt

--


90,000

 

Borrowings under revolving credit agreements

377,415


213,129

 

Repayments of revolving credit agreements

(308,775)


(279,985)

 

Issuance of common stock

15,025


1,165

 

Dividends on common stock

(34,189)


(32,121)

 

Refundable deposits from generators for transmission network upgrades

9,054


11,439

 

Repayment of refundable deposits from generators for transmission network upgrades

(4,876)


(16,778)

 

Other

(4,512)


(987)

 

Net cash provided by (used in) financing activities

49,142


(14,138)

 




 

NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS

(13,874)


6,586

 




 

CASH AND CASH EQUIVALENTS — Beginning of period

95,109


74,853

 

CASH AND CASH EQUIVALENTS — End of period

$ 81,235


$ 81,439

 




 

 
    


SOURCE ITC Holdings Corp.


 

ITC HOLDINGS CORP. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)

 




 

(in thousands, except share data)

June 30,


December 31,

 

2011


2010

 

ASSETS




 

Current assets




 

Cash and cash equivalents

$ 81,235


$ 95,109

 

Accounts receivable

93,177


80,417

 

Inventory

39,749


42,286

 

Deferred income taxes

9,529


--

 

Regulatory assets revenue accrual, including accrued interest

16,341


28,637

 

Other

6,895


5,293

 

Total current assets

246,926


251,742

 




 

Property, plant and equipment (net of accumulated depreciation and

amortization of $1,158,062 and $1,129,669, respectively)

3,097,923


2,872,277

 

Other assets




 

Goodwill

950,163


950,163

 

Intangible assets (net of accumulated amortization of $13,726 and $12,176,

respectively)

48,435


49,985

 

Other regulatory assets

148,757


138,152

 

Deferred financing fees (net of accumulated amortization of $12,845 and

$11,750, respectively)

22,096


19,949

 

Other

30,034


25,605

 

Total other assets

1,199,485


1,183,854

 

TOTAL ASSETS

$ 4,544,334


$ 4,307,873

 




 

LIABILITIES AND STOCKHOLDERS' EQUITY




 

Current liabilities




 

Accounts payable

$ 98,187


$ 66,953

 

Accrued payroll

12,141


18,606

 

Accrued interest

43,029


42,725

 

Accrued taxes

29,753


19,461

 

Regulatory liabilities revenue deferral, including accrued interest

30,543


17,658

 

Refundable deposits from generators for transmission network upgrades

25,372


10,492

 

Other

4,102


6,509

 

Total current liabilities

243,127


182,404

 




 

Accrued pension and postretirement liabilities

37,863


35,811

 

Deferred income taxes

367,803


314,979

 

Regulatory liabilities — revenue deferral, including accrued interest

36,038


43,202

 

Regulatory liabilities — accrued asset removal costs

88,601


90,987

 

Refundable deposits from generators for transmission network upgrades

3,812


14,515

 

Other

11,169


11,646

 

Long-term debt

2,565,769


2,496,896

 

Commitments and contingent liabilities




 




 

STOCKHOLDERS' EQUITY




 

Common stock, without par value, 100,000,000 shares authorized, 51,291,683 and 50,715,805 shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively

909,669


886,808

 

Retained earnings

280,246


229,437

 

Accumulated other comprehensive income

237


1,188

 

Total stockholders' equity

1,190,152


1,117,433

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$ 4,544,334


$ 4,307,873

 




 




 

 
    

 


 

(in thousands, except per share data)

Three months ended

June 30,


Six months ended

June 30,

 

2011


2010


2011


2010

 

OPERATING REVENUES

$ 185,098


$ 168,468


$ 364,484


$ 329,756

 








 

NET INCOME

$ 42,996


$ 36,301


$ 84,998


$ 70,505

 








 

DILUTED EPS

$ 0.83


$ 0.71


$ 1.64


$ 1.38

 








 

 
        

 

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