ITC Holdings Reports Increased Third Quarter and Year-to-Date 2010 Results; Raises 2010 Earnings Per Share Guidance

Oct 27, 2010

NOVI, Mich., Oct 27, 2010 /PRNewswire via COMTEX News Network/ -- Highlights

  • Net income for the third quarter of $38.4 million, or $0.75 per diluted common share
  • Net income for the nine months ended September 30, 2010 of $108.9 million, or $2.13 per diluted common share
  • Capital investments of $333.2 million for the nine months ended September 30, 2010
  • 2010 earnings per share guidance increased to $2.75 to $2.80 per share; reaffirmed 2010 capital expenditure guidance of $420 to $460 million
  • Reaffirmed 2011 earnings per share guidance of $3.20 to $3.30 per share and capital expenditure guidance of $560 to $640 million

 

    (in thousands, except

     per share data)         Three months ended         Nine months ended

                                September 30,             September 30,

                                -------------             -------------

                              2010           2009     2010           2009

                              ----           ----     ----           ----

    OPERATING REVENUES    $178,020       $151,328 $507,776       $464,507



    NET INCOME             $38,394        $37,818 $108,899        $97,336



    DILUTED EPS              $0.75          $0.74    $2.13          $1.92









 

ITC Holdings Corp. (NYSE: ITC) today announced its third quarter and year-to-date results for the period ended September 30, 2010. Net income for the quarter was $38.4 million, or $0.75 per diluted common share, compared to $37.8 million, or $0.74 per diluted common share for the third quarter of 2009. Net income for the nine months ended September 30, 2010 was $108.9 million, or $2.13 per diluted common share, compared to $97.3 million, or $1.92 per diluted common share for the same period last year. Diluted earnings per share in the third quarter and year-to-date 2009 periods include $0.11 associated with the recognition of regulatory assets at ITC Great Plains that did not reoccur in 2010.

For the nine months ended September 30, 2010, ITC invested $333.2 million in capital projects at its operating companies, including $45.5 million, $102.0 million, $175.6 million and $10.1 million at ITCTransmission, METC, ITC Midwest and ITC Great Plains, respectively.

"ITC continues to extend its strong track record of superior operational and financial performance," said Joseph L. Welch, chairman, president and CEO of ITC. "Our year-to-date results further demonstrate our ability to deliver on our commitments to customers and shareholders through the execution of our strategic plan. Importantly, while delivering near-term results, we are also building a solid foundation to support execution of our new five-year capital plan, which provides for significant investment in transmission infrastructure to improve energy delivery, reliability and efficiency, and allow for non-discriminatory access to all generating sources."

Reported net income for the third quarter of 2010 increased $0.6 million, or $0.01 per diluted common share, compared to the same period in 2009. For the nine months ended September 30, 2010, net income increased $11.6 million, or $0.21 per diluted common share, compared to the same period in 2009. Results for the third quarter and year-to-date 2009 periods reflect the impacts of the recognition of $9.3 million, or $0.11 per diluted common share, of regulatory assets at ITC Great Plains. 2010 results do not include the recognition of any such regulatory assets. In addition to this item, other key drivers that contributed to year-over-year variances include:

  • An increase in net income for the quarter and year-to-date period due to higher rate base and Allowance for Funds Used During Construction (AFUDC) at all operating companies.
  • Higher net income for the quarter and year-to-date period due to lower non-recoverable expenses.
  • Higher net income for the quarter and year-to-date period due to a lower consolidated effective income tax rate.
  • These increases in net income for the quarter and year-to-date period were partially offset by higher interest expense resulting from our financing activities for ITC Holdings which were completed in late 2009.

EPS and Capital Expenditure Guidance

As a result of ITC's financial performance for the nine months ended September 30, 2010, ITC is today raising its 2010 earnings per share guidance to a range of $2.75 to $2.80 per share, from a previous range of $2.70 to $2.75 per share.

2010 capital expenditure guidance remains in the range of $420 to $460 million, including $50 to $60 million, $130 to $140 million, $220 to $235 million and $20 to $25 million for ITCTransmission, METC, ITC Midwest and ITC Great Plains, respectively.

ITC is also reaffirming its 2011 earnings per share guidance of $3.20 to $3.30 and capital expenditure guidance of $560 to $640 million. Capital expenditure guidance reflects $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.

Third Quarter 2010 Financial Results Detail

ITC's operating revenues for the third quarter increased to $178.0 million from $151.3 million for the same period last year. This increase was primarily due to higher network revenues attributable to higher recoverable expenses associated with operating and maintenance expense and higher rate base at our regulated operating subsidiaries. In addition, the increase resulted from higher point-to-point revenues due primarily to an increase in scheduled transmission flow over our transmission systems.

Operation and maintenance (O&M) expenses of $33.7 million were $11.6 million higher during the third quarter of 2010 compared to the same period in 2009. This increase was a result of higher equipment and structure maintenance expenses, higher vegetation management expenses and higher tower painting expenses. The lower operation and maintenance expenses in 2009 were due in part to the expense mitigation efforts in 2009.

General and administrative (G&A) expenses of $18.2 million were $8.7 million higher during the third quarter of 2010 compared to the same period in 2009. This increase was largely a result of the reduction of expenses in 2009 in connection with the recognition of regulatory assets at ITC Great Plains which did not reoccur in 2010. In addition, G&A expenses increased due to personnel additions and higher stock compensation expense. G&A expenses for the quarter include $2.1 million of development costs at ITC Grid Development and its subsidiaries and at Green Power Express which were $0.2 million higher than the same period in 2009, absent the impacts of the recognition of the regulatory assets in 2009.

Depreciation and amortization expenses of $20.9 million increased by $1.3 million during the third quarter of 2010 compared to the same period in 2009. This increase was primarily due to a higher depreciable asset base resulting from property, plant and equipment additions. The increase was partially offset by the reduced depreciation rates that went into effect at ITCTransmission and METC in the third and fourth quarter of 2009, respectively. In addition, the increase in depreciation expense was further offset by lower depreciation expense at ITC Midwest due primarily to the Federal Energy Regulatory Commission (FERC) approval in July 2010 of a depreciation study for ITC Midwest which revised the depreciation rates used to calculate depreciation expense for the entire 2010 calendar year.

Interest expense of $36.1 million increased by $3.7 million for the third quarter of 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 third quarter of 2010 was 37.1 percent compared to 37.6 percent the same period last year.

Year-To-Date 2010 Financial Results Detail

ITC's operating revenues for the nine months ended September 30, 2010 increased to $507.8 million from $464.5 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 due primarily to higher operating and maintenance expenses, partially offset by lower recoverable depreciation and amortization expenses. In addition, the increase resulted from higher regional cost sharing revenues in 2010, due primarily to capital projects placed in-service that have been identified by MISO as eligible for regional cost sharing, and due to higher point-to-point revenues due primarily to an increase in scheduled transmission flow over our transmission systems. Lastly, other revenues increased due primarily to revenue recognized at METC for utilization of its jointly-owned transmission lines under its transmission ownership and operating agreements.

O&M expenses of $86.0 million were $18.2 million higher for the nine months ended September 30, 2010 compared to the same period in 2009. This increase was a result of higher equipment and structure maintenance expenses, higher vegetation management expenses and higher tower painting expenses. The lower operation and maintenance expenses in 2009 were due in part to the expense mitigation efforts in 2009.

G&A expenses of $53.4 million for the nine months ended September 30, 2010 were $3.7 million higher compared to the same period in 2009. This increase was largely a result of the reduction of expenses in 2009 in connection with the recognition of regulatory assets at ITC Great Plains which did not reoccur in 2010. In addition, G&A expenses increased due to personnel additions and higher stock compensation expense. These increases were partially offset by lower professional advisory and consulting services as well as lower general business expenses. G&A expenses for the nine months ended September 30, 2010 include $5.6 million of development costs at ITC Grid Development and its subsidiaries and at Green Power Express which were $1.5 million lower than the same period in 2009, absent the impacts of the recognition of the regulatory assets in 2009.

Depreciation and amortization expenses of $65.5 million decreased by $6.8 million during the nine months ended September 30, 2010, compared to the same period in 2009. This decrease was due the reduced depreciation rates that went into effect at ITCTransmission and METC in the third and fourth quarters of 2009, respectively. In addition, the decrease was partially attributable to lower depreciation expense at ITC Midwest due primarily to the FERC approval in July 2010 of a depreciation study for ITC Midwest which revised the depreciation rates used to calculate depreciation expense for the entire 2010 calendar year.

Interest expense of $106.5 million increased $9.8 million in the first nine months of 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 nine months ended September 30, 2010 was 36.7 percent compared to 37.5 percent in 2009.

Third Quarter Conference Call

ITC will conduct a conference call to discuss third quarter and year-to-date 2010 earnings results at 11:00 a.m. ET on October 28, 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 the 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. A listen-only live audio webcast of the conference call 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, November 2, 2010, can be accessed by dialing toll-free (800) 642-1687 (domestic) or (706) 645-9291 (international), passcode 17923639. 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 2010 third quarter results 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 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, 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 operates high-voltage transmission systems 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 new 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,                  Three               Nine

     except per share               months             months

     data)                          ended               ended

                                  September          September

                                       30,                  30,

                                   ----------          ----------

                                2010         2009          2010         2009

                                ----         ----          ----         ----

    OPERATING REVENUES      $178,020     $151,328      $507,776     $464,507



    OPERATING EXPENSES



      Operation and

       maintenance            33,748       22,132        85,971       67,792

      General and

       administrative         18,199        9,507        53,393       49,653

      Depreciation and

       amortization           20,856       19,590        65,538       72,325

      Taxes other than

       income taxes           12,143       11,049        36,077       32,759

      Other operating

       income and

       expense - net            (139)          (7)         (622)          (7)

                                ----          ---          ----          ---

        Total operating

         expenses             84,807       62,271       240,317      222,522

                              ------       ------       -------      -------



    OPERATING INCOME          93,213       89,057       267,459      241,985



    OTHER EXPENSES

     (INCOME)



      Interest expense        36,088       32,412       106,450       96,666

      Allowance for

       equity funds used

       during

       construction           (3,585)      (3,764)      (10,163)      (9,762)

      Other income              (878)        (738)       (2,550)      (2,125)

      Other expense              586          521         1,617        1,487

                                 ---          ---         -----        -----

        Total other

         expenses (income)    32,211       28,431        95,354       86,266

                              ------       ------        ------       ------



    INCOME BEFORE

     INCOME TAXES             61,002       60,626       172,105      155,719



    INCOME TAX

     PROVISION                22,608       22,808        63,206       58,383

                              ------       ------        ------       ------



    NET INCOME               $38,394      $37,818      $108,899      $97,336

                             =======      =======      ========      =======



    Basic earnings per

     common share              $0.76        $0.76         $2.17        $1.95

    Diluted earnings

     per common share          $0.75        $0.74         $2.13        $1.92



    Dividends declared

     per common share         $0.335       $0.320        $0.975       $0.930







    ITC HOLDINGS CORP. AND SUBSIDIARIES

    CONDENSED CONSOLIDATED STATEMENTS OF

     FINANCIAL POSITION (UNAUDITED)



    (in thousands, except share       September        December

     data)                                30,             31,

                                            2010            2009

    ASSETS

      Current assets

        Cash and cash equivalents        $74,263         $74,853

        Accounts receivable               89,454          72,352

        Inventory                         42,639          36,834

        Deferred income taxes             29,642          23,859

       Regulatory assets - revenue

        accrual, including accrued

        interest                          39,687          82,871

        Other                              6,257           3,244

                                           -----           -----

         Total current assets            281,942         294,013



      Property, plant and

       equipment (net of

       accumulated depreciation

       and                             2,768,971       2,542,064

      amortization of $1,116,060

       and $1,051,045,

       respectively)

      Other assets

        Goodwill                         950,163         950,163

        Intangible assets (net of

         accumulated amortization

         of $11,406 and $9,095,           49,755          51,987

         respectively)

        Regulatory assets - revenue

         accrual, including accrued

         interest                          6,838          20,406

        Other regulatory assets          134,095         134,924

        Deferred financing fees

         (net of accumulated

         amortization of $11,082

         and                              20,554          21,672

              $9,616, respectively)

        Other                             17,224          14,487

                                          ------          ------

         Total other assets            1,178,629       1,193,639

    TOTAL ASSETS                      $4,229,542      $4,029,716

                                      ==========      ==========



    LIABILITIES AND

     STOCKHOLDERS' EQUITY

      Current liabilities

        Accounts payable                 $67,586         $43,508

        Accrued payroll                   12,801          13,648

        Accrued interest                  23,225          39,099

        Accrued taxes                     10,138          21,188

        Regulatory liabilities -

         revenue deferral,

         including accrued interest       10,353               -

        Refundable deposits from

         generators for

         transmission network

         upgrades                         26,134          25,891

        Other                              3,419           3,344

                                           -----           -----

         Total current liabilities       153,656         146,678



      Accrued pension and

       postretirement liabilities         29,502          31,158

      Deferred income taxes              324,124         255,516

      Regulatory liabilities -

       revenue deferral,

       including accrued interest         63,549          10,238

      Regulatory liabilities -

       accrued asset removal

       costs                              91,297         112,430

      Refundable deposits from

       generators for

       transmission network

       upgrades                            6,804          17,664

      Other                               12,181          10,111

      Long-term debt                   2,460,180       2,434,398

      Commitments and contingent

       liabilities



    STOCKHOLDERS' EQUITY

       Common stock, without par

        value, 100,000,000 shares

        authorized, 50,633,705 and

        50,084,061 shares issued

        and outstanding at

        September 30, 2010 and

        December 31, 2009,

        respectively                     879,360       862,512

        Retained earnings                209,606         149,776

        Accumulated other

         comprehensive loss                 (717)           (765)

                                            ----            ----

         Total stockholders' equity    1,088,249       1,011,523

                                       ---------       ---------

    TOTAL LIABILITIES AND

     STOCKHOLDERS' EQUITY             $4,229,542      $4,029,716

                                      ==========      ==========







    ITC HOLDINGS CORP. AND SUBSIDIARIES

    CONDENSED CONSOLIDATED STATEMENTS OF CASH

     FLOWS (UNAUDITED)

    -----------------------------------------



                                                  Nine months

    (in thousands)                                   ended

                                                   September

                                                        30,

                                                    ----------

                                                 2010           2009

                                                 ----           ----

    CASH FLOWS FROM OPERATING

     ACTIVITIES

      Net income                             $108,899        $97,336

      Adjustments to reconcile net

       income to net cash provided

       by operating activities:

        Depreciation and amortization

         expense                               65,538         72,325

        Revenue accrual and deferral -

         including accrued interest           120,416         16,861

        Deferred income tax expense            56,768         57,330

        Allowance for equity funds

         used during construction             (10,163)        (9,762)

        Recognition of ITC Great

         Plains regulatory assets                   -         (8,191)

        Other                                  10,077          8,260

        Changes in assets and

         liabilities, exclusive of

         changes shown separately:

         Accounts receivable                  (18,091)        (4,717)

         Inventory                             (5,805)       (10,130)

         Other current assets                  (3,013)          (799)

         Accounts payable                       5,372         (5,360)

         Accrued payroll                         (223)           234

         Accrued interest                     (15,874)       (18,817)

         Accrued taxes                         (9,742)        (8,038)

         Other current liabilities                 76         (2,713)

         Other non-current assets and

          liabilities, net                     (6,567)         2,896

                                               ------          -----

           Net cash provided by operating

            activities                        297,668        186,715



    CASH FLOWS FROM INVESTING

     ACTIVITIES

      Expenditures for property,

       plant and equipment                   (270,183)      (327,611)

      Proceeds from sale of

       securities                              14,576            920

      Purchases of securities                 (14,587)        (1,255)

      Other                                       (78)        (2,585)

                                                  ---         ------

           Net cash used in investing

            activities                       (270,272)      (330,531)



    CASH FLOWS FROM FINANCING

     ACTIVITIES

      Issuance of long-term debt               90,000        100,000

      Borrowings under revolving

       credit agreements                      329,027        482,466

      Repayments of revolving credit

       agreements                            (393,593)      (426,529)

      Issuance of common stock                  7,049          2,324

      Dividends on common stock               (49,064)       (46,389)

      Refundable deposits from

       generators for transmission

       network upgrades                        16,203         35,188

      Repayment of refundable

       deposits from generators for

       transmission network upgrades          (26,567)        (5,228)

      Other                                    (1,041)        (1,945)

                                               ------         ------

           Net cash (used in) provided by

            financing activities              (27,986)       139,887

                                              -------        -------



    NET DECREASE IN CASH AND CASH

     EQUIVALENTS                                 (590)        (3,929)



    CASH AND CASH EQUIVALENTS -

     Beginning of period                       74,853         58,110

    CASH AND CASH EQUIVALENTS -

     End of period                            $74,263        $54,181

                                              =======        =======









 

SOURCE ITC Holdings Corp.

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