Highlights
- Third quarter 2014 operating earnings of $0.47 per diluted common share
increased over the same period last year; third quarter 2014 reported earnings of
$0.47 per diluted common share
- Operating earnings for the nine months ended September 30, 2014 of $1.36 per
diluted common share increased over the same period last year; reported
earnings for the nine months ended September 30, 2014 of $1.25 per diluted
common share
- Capital investments of $598.9 million for the nine months ended September 30,
2014
- Reaffirmed 2014 operating earnings per share guidance of $1.83 to $1.90 per
diluted share and revised capital expenditure guidance to $785 to $835 million
NOVI, Mich., October 30, 2014 - ITC Holdings Corp. (NYSE: ITC) announced today its
results for the third quarter and nine-month period ended September 30, 2014.
Reported net income for the third quarter, measured in accordance with Generally Accepted
Accounting Principles (GAAP), was $73.9 million, or $0.47 per diluted common share,
compared to $59.0 million or $0.37 per diluted common share for the third quarter of 2013.
For the nine months ended September 30, 2014, reported net income was $197.3 million, or
$1.25 per diluted common share, compared to $156.6 million, or $0.99 per diluted common
share for the same period last year.
Operating earnings for the third quarter were $73.7 million, or $0.47 per diluted common share,
compared to operating earnings of $66.5 million, or $0.42 per diluted common share for the third
quarter of 2013. For the nine months ended September 30, 2014, operating earnings were
$216.1 million, or $1.36 per diluted common share, compared to operating earnings of $188.6
million, or $1.19 per diluted common share for the same period last year.
ITC invested $598.9 million in capital projects at its operating companies during the nine-month
period ended September 30, 2014, including $190.9 million at ITCTransmission, $94.3 million at
METC, $195.2 million at ITC Midwest and $118.5 million at ITC Great Plains.
“Our strong performance in the third quarter sets the stage for us to deliver on another solid year,”
said Joseph L. Welch, chairman, president and CEO of ITC. “We are very pleased with the
progress we have made this year around our investments in critical transmission infrastructure for
the benefit of customers while also advancing our strategic initiatives. Our focus remains on
executing in the near-term while also positioning the company for success longer-term for the
benefit of all of our constituents.”
Operating Earnings
Operating earnings are non-GAAP measures that exclude the impact of after-tax expenses
associated with the following items:
1. The Entergy Corporation transaction expenses of approximately $(0.1) million for the third
quarter of 2014 and $7.5 million, or $0.05 per diluted common share, for the third quarter
of 2013. These expenses total $0.6 million for the nine months ended September 30,
2014 and $31.9 million, or $0.20 per diluted common share, for the nine months ended
September 30, 2013.
2. Certain acquisition accounting adjustments for ITC Midwest, ITCTransmission, and METC
resulting from the FERC audit order on ITC Midwest issued in May 2012 of approximately
$0.1 million for the third quarter of 2013. These expenses also totaled approximately $0.1
million and $0.2 million for the nine months ended September 30, 2014 and 2013,
respectively.
3. Loss on extinguishment of debt associated with the cash tender offer and consent
solicitation transaction for select bonds at ITC Holdings that we completed in the second
quarter of 2014. The impact of this item totaled $(0.1) million for the third quarter of 2014
and $18.0 million, or $0.11 per diluted common share, for the nine months ended
September 30, 2014.
Operating earnings for the third quarter and for the nine months ended September 30, 2014
increased by $7.2 million, or $0.05 per diluted common share, and $27.5 million, or $0.17 per
diluted common share, compared with the same periods last year. The increases in both periods
were largely attributable to higher income associated with increased rate base at our operating
companies.
Share Repurchase
On June 20, 2014, ITC announced an accelerated share repurchase of up to $150 million
(minimum of $130 million) that is expected to be completed by the end of 2014. Upon
announcement, the company also indicated an initial repurchase of approximately 2.9 million
shares, which also represents the amount repurchased through September 30, 2014.
Balance Sheet Activities
On October 23, 2014, ITC Great Plains priced $150.0 million of First Mortgage Bonds, Series A,
due 2044 at a coupon of 4.16%. The financing is expected to close in November 2014. The
proceeds will be used to repay the $100.0 million borrowed under the ITC Great Plains’ term loan
and for general corporate purposes, including the repayment of borrowings under the ITC Great
Plains’ revolving credit agreement. The bonds will not be registered under the Securities Act and
may not be offered or sold in the United States absent registration or an applicable exemption
from registration requirements.
2014 EPS and Capital Expenditure Guidance
For 2014, ITC is reaffirming its full year operating earnings per share guidance of $1.83 to $1.90.
ITC is revising its 2014 capital guidance to a range of $785 to $835 million from the previous
range of $730 to $840 million. This revised range includes $255 to $265 million for
ITCTransmission, $130 to $145 million for METC, $280 to $295 million for ITC Midwest and $120
to $130 million for ITC Great Plains.
Third Quarter 2014 Operating Earnings Financial Results Detail
ITC’s operating revenues for the third quarter of 2014 increased to $270.1 million compared to
$238.8 million for the third quarter of 2013. This increase was primarily due to higher revenue
requirements attributable to higher rate base at our regulated operating subsidiaries, as well as an
increase in regional cost sharing revenues resulting from additional capital projects being placed
in-service that have been identified by the Midcontinent ISO (MISO) as eligible for regional cost
sharing.
Operation and maintenance (O&M) expenses of $29.0 million were $0.7 million lower than the
same period in 2013. This decrease was primarily due to lower vegetation management
requirements, partially offset by higher substation and tower painting expenses.
General and administrative (G&A) expenses of $29.0 million were $6.1 million higher compared to
the same period in 2013. Amounts reported for the third quarter 2014 and 2013 exclude $(0.2)
million and $9.0 million, respectively, of pre-tax expenses related to the Entergy transaction. This
increase was primarily due to higher professional services such as legal, advisory and financial
services fees for various development initiatives.
Depreciation and amortization expenses of $31.9 million increased by $2.1 million compared to
the same period in 2013 due to a higher depreciable base resulting from property, plant and
equipment additions.
Taxes other than income taxes of $19.2 million were $2.5 million higher than the same period in
2013. This increase was due to 2013 capital additions at our regulated operating subsidiaries,
which are included in the tax base for 2014 personal property tax calculations.
Interest expense of $47.3 million increased by $4.3 million compared to the same period in 2013.
Amounts reported for the third quarter 2013 exclude $1.1 million of pre-tax expenses related to
the adjustments to operating earnings. The increase was due primarily to higher borrowing levels
to finance capital investments.
The effective income tax rate for the third quarter of 2014 was 37.7 percent compared to 35.9
percent for the same period last year. Amounts reported for the third quarter of 2013 exclude
approximately $2.6 million associated with adjustments to operating earnings.
Year-To-Date 2014 Operating Earnings Financial Results Detail
ITC’s operating revenues for the nine months ended September 30, 2014 increased to $792.0
million compared to $685.9 million from the same period last year. This increase was primarily
due to higher revenue requirements attributable to higher rate base at our regulated operating
subsidiaries, as well as an increase in regional cost sharing revenues due to additional capital
projects being placed in-service that have been identified by MISO as eligible for regional cost
sharing.
O&M expenses of $79.7 million were $4.2 million lower for the nine months ended September 30,
2014 compared to the same period in 2013. This decrease was primarily due to lower vegetation
management requirements.
G&A expenses of $86.1 million were $17.2 million higher compared to the same period in 2013.
Amounts reported for the nine months ended September 30, 2014 and 2013 exclude
approximately $1.0 million and $41.9 million, respectively, of pre-tax expenses associated with the
Entergy transaction. This increase was primarily due to higher professional services such as
legal, advisory and financial services fees for various development initiatives along with higher
compensation expenses associated with personnel additions.
Depreciation and amortization expenses of $94.6 million increased by $7.0 million for the nine
months ended September 30, 2014 compared to the same period in 2013. This increase was
primarily due to a higher depreciable base resulting from property, plant and equipment additions. Taxes other than income taxes of $57.5 million were $8.0 million higher compared to the same
period in 2013. This increase was due to capital additions made at our regulated operating
subsidiaries, which are included in the tax base for 2014 personal property taxes.
Interest expense of $138.3 million was $16.5 million higher compared to the same period in 2013.
Amounts reported for the nine months ended September 30, 2014 and 2013 exclude
approximately $0.2 million and $1.7 million, respectively, of pre-tax expenses associated with the
adjustments to operating earnings noted previously. This increase was due primarily to higher
borrowing levels to finance capital investments.
The effective income tax rate for the nine months ended September 30, 2014 was 38.0 percent
compared to 36.2 percent for the same period in 2013. Amounts reported for the nine months
ended September 30, 2014 and 2013 exclude income taxes of $11.5 million and $11.6 million,
respectively, associated with adjustments to operating earnings noted previously.
Third Quarter Conference Call and Webcast
Joseph L. Welch, chairman, president and CEO and Rejji P. Hayes, senior vice president, CFO
and treasurer will discuss the third quarter results in a conference call at 11 a.m. Eastern on
Thursday, October 30, 2014. Individuals wishing to participate in the conference call may dial tollfree
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. The conference call replay, available
through November 4, 2014, and can be accessed by dialing 855-859-2056 (toll free) or
404-537-3406, passcode 20705064. The webcast will be archived on the ITC website.
Other Available Information
More detail about third quarter 2014 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, http://investor.itc-holdings.com. Paper copies can also be made available by
contacting us through our website.
About ITC Holdings Corp.
ITC Holdings Corp. (NYSE: ITC) is the nation’s largest independent electric transmission
company. Based in Novi, Michigan, ITC invests in the electric transmission grid to improve
reliability, expand access to markets, lower the overall cost of delivered energy and allow new
generating resources to interconnect to its transmission systems. ITC’s regulated operating
subsidiaries include ITCTransmission, Michigan Electric Transmission Company, ITC Midwest and
ITC Great Plains. Through these subsidiaries, ITC owns and operates high-voltage transmission
facilities in Michigan, Iowa, Minnesota, Illinois, Missouri, Kansas and Oklahoma, serving a
combined peak load exceeding 26,000 megawatts along 15,000 circuit miles of transmission line.
Through ITC Grid Development and its subsidiaries, the company also focuses on expansion in
areas where significant transmission system improvements are needed. For more information,
please visit ITC’s website at www.itc-holdings.com (ITC-itc-F).
GAAP v. Non-GAAP Measures
ITC’s reported earnings are prepared in accordance with GAAP and represent earnings as
reported to the Securities and Exchange Commission. ITC’s management believes the
company’s operating earnings, or GAAP earnings adjusted for specific items as described in the
release, provide a more meaningful representation of the company’s fundamental earnings power.
However, such measures should not be considered in isolation or as substitutes for results
prepared in accordance with GAAP.
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 forwardlooking
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 reports on Form 10-K,
quarterly reports on Form 10-Q and other filings made with the Securities and Exchange
Commission.
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. 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.
Investor/Analyst contact: Gretchen Holloway, 248-946-3595; gholloway@itctransco.com
Media contact: Robert Doetsch, 248-946-3493; rdoetsch@itctransco.com