ITC Holdings Reports Increased Fourth Quarter and Year-End 2012 Results

Feb 27, 2013, 19:05 ET from ITC Holdings Corp.

NOVI, Mich., Feb. 27, 2013 /PRNewswire/ --

Highlights

  • Full-year 2012 operating earnings of $4.14 per diluted common share; full-year 2012 reported earnings of $3.60 per diluted common share
  • Fourth quarter 2012 operating earnings of $1.09 per diluted common share; fourth quarter 2012 reported earnings of $0.92 per diluted common share
  • Full-year 2012 capital investments of $819.8 million
  • Reaffirmed 2013 operating earnings per share guidance of $4.80 to $5.00 per diluted share and capital expenditure guidance of $760 to $860 million

(in thousands, except per share data)

Three months ended  

December 31,


Twelve months ended

December 31,


2012


2011


2012


2011

OPERATING REVENUES

$221,646


$201,610


$830,535


$757,397









REPORTED NET INCOME

$48,256


$42,663


$187,876


$171,685









OPERATING EARNINGS

$56,913


$44,863


$216,296


$174,048









REPORTED DILUTED EPS

$0.92


$0.82


$3.60


$3.31









OPERATING DILUTED EPS

$1.09


$0.86


$4.14


$3.35

ITC Holdings Corp. (NYSE: ITC) today announced its results for the fourth quarter and year-ended December 31, 2012.  Reported net income for the quarter, measured in accordance with Generally Accepted Accounting Principles (GAAP), was $48.3 million, or $0.92 per diluted common share, compared to $42.7 million or $0.82 per diluted common share for the fourth quarter of 2011.  For the year ended December 31, 2012, reported net income was $187.9 million, or $3.60 per diluted common share, compared to $171.7 million, or $3.31 per diluted common share for the same period last year.

Operating earnings for the fourth quarter were $56.9 million, or $1.09 per diluted common share, compared to operating earnings of $44.9 million, or $0.86 per diluted common share for the fourth quarter of 2011. For the year ended December 31, 2012, operating earnings were $216.3 million, or $4.14 per diluted common share, compared to operating earnings of $174.0 million, or $3.35 per diluted common share for the same period last year.  Operating earnings are non-GAAP measures that exclude the impact of after-tax expenses for the following items:

  • After-tax expenses associated with the Entergy Corporation (Entergy) transaction of  approximately $8.6 million or $0.17 per diluted common share and $20.1 million or $0.38 per diluted common share for the fourth quarter and year ended December 31, 2012, respectively, and approximately $7.0 million, or $0.13 per share for both the fourth quarter and year ended December 31, 2011. 
  • After-tax expenses associated with the estimated refund liability recorded for 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 $8.3 million or $0.16 per diluted common share for the year ended December 31, 2012.
  • An after-tax gain associated with the adoption of the Michigan Corporate Income Tax (CIT) of approximately $4.6 million or $0.09 per share for both the fourth quarter and year ended December 31, 2011.

Operating earnings for the fourth quarter and year ended December 31, 2012 increased by $12.0 million, or $0.23 per diluted common share, and $42.2 million, or $0.79 per diluted common share, respectively, compared to the same periods last year.  The increases in both periods were largely attributable to higher income associated with increased rate base and AFUDC at our operating companies. For the year-ended December 31, 2012, this increase was partially offset by lower revenues associated with the final amortization of the ITCTransmission rate freeze revenue deferral which expired in May 2011.

ITC invested $819.8 million in capital projects at its operating companies during the year-ended December 31, 2012, including $231.2 million, $149.0 million, $343.3 million and $96.3 million at ITCTransmission, METC, ITC Midwest and ITC Great Plains, respectively.

"As ITC marks its 10th anniversary, we are pleased to report another year of strong performance and continued success in delivering on the commitments we have made to our customers and shareholders", said Joseph L. Welch, chairman, president and CEO of ITC.  "These results are the culmination of our overarching strategy of investing in our core systems to achieve operational excellence and building on our leadership position to develop a 21st century transmission system, all while maintaining our status as an independent transmission company.  As we look further into 2013, we remain focused on completing our transaction with Entergy, which supports our strategy and represents a natural extension of our independent business model into the Mid-South region, while also building on our stand-alone plans."

EPS and Capital Expenditure Guidance For 2013, ITC is reaffirming its full year operating earnings per share guidance of $4.80 to $5.00, excluding any impact of the Entergy transaction announced on December 5, 2011.  ITC is also reaffirming its 2013 capital guidance of $760 to $860 million, which includes $200 to $230 million, $160 to $180 million, $270 to $300 million and $130 to $150 million for ITCTransmission, METC, ITC Midwest and ITC Great Plains, respectively.

Fourth Quarter 2012 Operating Earnings Financial Results Detail ITC's operating revenues for the fourth quarter of 2012 increased to $221.6 million compared to $201.6 million for the fourth quarter of 2011.  This increase was primarily due to higher revenue requirements attributable to higher rate base at our regulated operating subsidiaries and higher recoverable operating expenses, as well as an increase in regional cost sharing revenues due to additional capital projects being placed in-service that have been identified by the Midwest ISO (MISO) as eligible for regional cost sharing. 

Operation and maintenance (O&M) expenses of $31.6 million decreased by $5.2 million compared to the same period in 2011. This decrease was due to lower vegetation management expenses and a decrease in activities associated with surveying transmission overhead lines.

General and administrative (G&A) expenses of $24.2 million were $4.8 million higher compared to the same period in 2011.  Amounts reported for the fourth quarter 2012 and 2011 exclude $9.1 million and $8.4 million, respectively, of pre-tax expenses related to the Entergy transaction.  This increase was primarily due to higher compensation-related expenses and an increase in other professional services.

Depreciation and amortization expenses of $28.1 million increased by $3.4 million compared to the same period in 2011 due to a higher depreciable base resulting from property, plant and equipment additions.

Taxes other than income taxes of $15.5 million were $1.7 million higher than the same period in 2011. This increase was due to 2011 capital additions at our regulated operating subsidiaries, which are included in the tax base for 2012 personal property taxes.

Interest expense of $38.8 million increased by $1.9 million compared to the same period in 2011 due primarily to higher borrowing levels to finance capital investments.

The effective income tax rate for the fourth quarter of 2012 was 36.3 percent compared to 39.9 percent for the same period last year.  Amounts reported for the fourth quarter of 2012 exclude approximately $0.5 million of income taxes associated with the Entergy transaction.  Amounts reported for the fourth quarter of 2011 exclude the impacts of a one-time reduction to the income tax provision of $4.6 million associated with the adoption of the CIT and income taxes of approximately $1.6 million associated with the Entergy transaction.

Year-End 2012 Operating Earnings Financial Results Detail ITC's operating revenues for the year ended December 31, 2012 increased to $841.5 million, excluding approximately $11.0 million in reduction to revenues associated with the ITC Midwest FERC audit related refunds recorded for ITCTransmission, METC and ITC Midwest, compared to $757.4 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 and higher recoverable operating expenses, 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.  Partially offsetting these increases was the impact of the elimination of the amortization of the ITCTransmission rate freeze revenue deferral in May 2011.

O&M expenses of $121.9 million were $7.3 million lower for the year ended December 31, 2012 compared to the same period in 2011. This decrease was due to increased cost efficiencies associated primarily with substation, breaker and relay maintenance activities, partially offset by higher vegetation management expenses, a decrease in activities associated with surveying transmission overhead lines and lower operating and training expenses.

G&A expenses of $85.7 million were $11.5 million higher compared to the same period in 2011. Amounts report for the year-ended December 31, 2012 and December 31, 2011 exclude approximately $26.4 million and $8.6 million of pre-tax expenses associated with the Entergy transaction, respectively.  The increase for the period was due to higher compensation-related expenses, higher general business expenses associated with increased information technology support and higher other professional services. The increase was also attributable to the recognition of the Kansas V-Plan Project regulatory asset which reduced expenses in 2011 and did not reoccur in 2012.

Depreciation and amortization expenses of $106.5 million increased by $11.5 million for the year-ended December 31, 2012 compared to the same period in 2011. This increase was primarily due to a higher depreciable base resulting from property, plant and equipment additions.

Taxes other than income taxes of $59.7 million were $6.3 million higher compared to the same period in 2011. This increase was due to 2011 capital additions at our regulated operating subsidiaries, which are included in the tax base for 2012 personal property taxes.

Interest expense of $154.4 million, which excludes the impact of $1.3 million of interest on the ITC Midwest FERC audit related refund recorded at ITCTransmission, METC and ITC Midwest, increased $7.5 million compared to the same period in 2011 due primarily to higher borrowing levels to finance capital investments.

The effective income tax rate for the year ended December 31, 2012 was 35.7 percent compared to 36.7 percent for the same period in 2011. Amounts reported for the year ended December 31, 2012 exclude income taxes of $6.5 million associated with the Entergy transaction and income taxes of $4.8 million associated with the ITC Midwest FERC audit related refund recorded at ITCTransmission, METC and ITC Midwest.  Amounts reported for the year ended December 31, 2011 exclude the impacts of a one-time reduction to the income tax provision of $4.6 million associated with the adoption of the CIT and income taxes of approximately $1.6 million associated with the Entergy transaction.

Fourth Quarter and Year-End Conference Call and Webcast     ITC will conduct a webcast and conference call at 11 a.m. Eastern on Thursday, February 28, 2013.  Joseph L. Welch, chairman, president and CEO, will provide a business overview, and Cameron M. Bready, executive vice president 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 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 Tuesday, March 5, 2013, can be accessed by dialing 855-859-2056 (toll free) or 404-537-3406, passcode 93804905. The webcast will be archived on the ITC website.

Other Available Information More detail about the year-end 2012 results may be found in ITC's Form 10-K filing. Once filed with the Securities and Exchange Commission, an electronic copy of our 10-K can be found at our website, http://investor.itc-holdings.com. Written 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)

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 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 Form 10-K filed 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.

 

ITC HOLDINGS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS

Three months ended

Twelve months ended

December 31,

December 31,

(in thousands, except per share data)

2012

2011

2012

2011

OPERATING REVENUES

$

221,646

$

201,610

$

830,535

$

757,397

OPERATING EXPENSES

Operation and maintenance

31,627

36,802

121,941

129,288

General and administrative

33,300

27,875

112,091

82,790

Depreciation and amortization

28,059

24,643

106,512

94,981

Taxes other than income taxes

15,515

13,810

59,701

53,430

Other operating (income) and expense — net

(183)

(233)

(769)

(844)

Total operating expenses

108,318

102,897

399,476

359,645

OPERATING INCOME

113,328

98,713

431,059

397,752

OTHER EXPENSES (INCOME)

Interest expense

38,816

36,927

155,734

146,936

Allowance for equity funds used during construction

(7,200)

(4,621)

(23,000)

(16,699)

Other income

15

(692)

(2,401)

(2,881)

Other expense

1,500

853

4,218

3,962

Total other expenses (income)

33,131

32,467

134,551

131,318

INCOME BEFORE INCOME TAXES

80,197

66,246

296,508

266,434

INCOME TAX PROVISION

31,941

23,583

108,632

94,749

NET INCOME

$

48,256

$

42,663

$

187,876

$

171,685

Basic earnings per common share

$

0.93

$

0.83

$

3.65

$

3.36

Reported diluted earnings per common share

$

0.92

$

0.82

$

3.60

$

3.31

Operating diluted earnings per common share 

$

1.09

$

0.86

$

4.14

$

3.35

Dividends declared per common share

$

0.378

$

0.353

$

1.460

$

1.375

RECONCILIATION OF REPORTED NET INCOME (GAAP) TO OPERATING EARNINGS (NON-GAAP MEASURE)

Three months ended

Twelve months ended

December 31,

December 31,

2012

2011

2012

2011

Reported net income

$

48,256

$

42,663

$

187,876

$

171,685

Pre-tax Entergy transaction related expenses

9,100

8,416

26,555

8,616

Pre-tax liability for audit related refund

102

-

13,150

-

One-time CIT adjustment

-

(4,652)

-

(4,652)

Income taxes on adjustments

(545)

(1,564)

(11,285)

(1,601)

Operating earnings

$

56,913

$

44,863

$

216,296

$

174,048

RECONCILIATION OF REPORTED DILUTED EPS (GAAP) TO OPERATING DILUTED EPS (NON-GAAP MEASURE)

Three months ended

Twelve months ended

December 31,

December 31,

2012

2011

2012

2011

Reported diluted EPS

$

0.92

$

0.82

$

3.60

$

3.31

Pre-tax Entergy transaction related expenses 

0.17

0.16

0.51

0.16

Pre-tax liability for audit related refund

-

-

0.25

-

One-time CIT adjustment

-

(0.09)

-

(0.09)

Income taxes on adjustments

-

(0.03)

(0.22)

(0.03)

Operating diluted EPS

$

1.09

$

0.86

$

4.14

$

3.35

 

ITC HOLDINGS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

December 31,

December 31,

(in thousands, except share data)

2012

2011

ASSETS

Current assets

Cash and cash equivalents

$            26,187

$          58,344

Accounts receivable

72,192

76,895

Inventory

37,357

34,855

Deferred income taxes

23,014

20,636

Regulatory assets — revenue accruals, including accrued interest

7,489

6,639

Prepaid assets

29,235

4,129

Other

2,752

30

Total current assets

198,226

201,528

Property, plant and equipment (net of accumulated depreciation and amortization of $1,269,810 and $1,193,164, respectively)

4,134,579

3,415,823

Other assets

Goodwill

950,163

950,163

Intangible assets ( net of accumulated amortization of $18,397 and $15,276, respectively)

48,492

46,885

Other regulatory assets

180,378

161,987

Deferred financing fees (net of accumulated amortization of $17,838 and $14,594,   respectively)

19,293

20,989

Other

33,678

25,991

Total other assets

1,232,004

1,206,015

TOTAL ASSETS

$       5,564,809

$      4,823,366

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable

$          123,022

$         136,934

Accrued payroll

20,740

18,013

Accrued interest

44,708

43,642

Accrued taxes

28,117

25,627

Regulatory liabilities — revenue deferrals, including accrued interest

53,763

46,579

Refundable deposits from generators for transmission network upgrades

40,745

38,805

Debt maturing within one year

651,929

-

Other

40,287

5,867

Total current liabilities

1,003,311

315,467

Accrued pension and postretirement liabilities

53,243

44,923

Deferred income taxes

460,072

373,268

Regulatory liabilities — revenue deferrals, including accrued interest

28,613

50,917

Regulatory liabilities — accrued asset removal costs

75,477

83,934

Refundable deposits from generators for transmission network upgrades

7,623

14,570

Other

26,317

36,373

Long-term debt

2,495,298

2,645,022

STOCKHOLDERS' EQUITY

Common stock, without par value, 100,000,000 shares authorized, 52,248,514 and 51,323,368  shares issued and outstanding at December 31, 2012 and 2011, respectively

989,334

943,444

Retained earnings

443,569

330,816

Accumulated other comprehensive loss

(18,048)

(15,368)

Total stockholders' equity

1,414,855

1,258,892

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$       5,564,809

$      4,823,366

ITC HOLDINGS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

Twelve months ended

December 31,

(in thousands)

2012

2011

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$

187,876

$

171,685

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

Depreciation and amortization expense

106,512

94,981

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

(13,052)

56,944

Deferred income tax expense

67,285

30,797

Allowance for equity funds used during construction

(23,000)

(16,699)

Other – net

13,772

13,361

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

Accounts receivable

1,721

2,434

Inventory

(2,502)

7,431

Prepaid and other current assets

(25,102)

1,134

Accounts payable

(5,400)

12,573

Accrued payroll

1,583

(1,096)

Accrued interest

1,066

917

Accrued taxes

24,247

34,279

Tax benefit for excess tax deductions of share-based compensation

(23,022)

(28,114)

Other current liabilities

2,912

(246)

Other non-current assets and liabilities, net

12,627

535

Net cash provided by operating activities

327,523

380,916

CASH FLOWS FROM INVESTING ACTIVITIES

Expenditures for property, plant and equipment

(802,763)

(556,931)

Proceeds from sale of securities

5,935

3,839

Purchases of securities

(11,779)

(8,136)

Other

(454)

1,033

Net cash used in investing activities

(809,061)

(560,195)

CASH FLOWS FROM FINANCING ACTIVITIES

Issuance of long-term debt

175,000

-

Borrowings under revolving credit agreements

1,355,150

1,065,215

Borrowings under term loan credit agreement

200,000

-

Repayments of revolving credit agreements

(1,228,410)

(917,555)

Issuance of common stock

14,189

18,993

Dividends on common stock

(75,153)

(70,363)

Refundable deposits from generators for transmission network upgrades

33,310

35,768

Repayment of refundable deposits from generators for transmission network upgrades

(38,253)

(6,976)

Tax benefit for excess tax deductions of share-based compensation

23,022

28,114

Other

(9,474)

(10,682)

Net cash provided by financing activities

449,381

142,514

NET DECREASE IN CASH AND CASH EQUIVALENTS

(32,157)

(36,765)

CASH AND CASH EQUIVALENTS — Beginning of period

58,344

95,109

CASH AND CASH EQUIVALENTS — End of period

$           26,187

$           58,344

 

 

SOURCE ITC Holdings Corp.



RELATED LINKS

http://www.itc-holdings.com