ITC Holdings Reports Increased Third Quarter And Year-To-Date 2012 Results; Raises 2012 Operating Earnings Per Share Guidance; Updates 2012 Capital Guidance

NOVI, Mich., Oct. 23, 2012 /PRNewswire/ --

Highlights

  • Operating earnings for the third quarter of $1.07 per diluted common share; reported earnings for the third quarter of $0.98 per diluted common share
  • Operating earnings for the nine months ended September 30, 2012 of $3.05 per diluted common share; reported earnings for the nine months ended September 30, 2012 of $2.68 per diluted common share
  • Capital investments of $626.2 million for the nine months ended September 30, 2012
  • 2012 operating earnings per share guidance increased to $4.10 to $4.15 per share
  • 2012 capital investment guidance updated to a range of $780 to $825 million

(in thousands, except per share data)

Three months ended

September 30,


Nine months ended

September 30,


2012


2011


2012


2011

OPERATING REVENUES

$214,801


$191,303


$608,889


$555,787









REPORTED NET INCOME

$51,183


$44,024


$139,620


$129,022









OPERATING EARNINGS

$55,974


$44,024


$159,383


$129,022









REPORTED DILUTED EPS

$0.98


$0.85


$2.68


$2.49









OPERATING DILUTED EPS

$1.07


$0.85


$3.05


$2.49

ITC Holdings Corp. (NYSE: ITC) today announced its results for the third quarter and nine month period ended September 30, 2012.  Reported net income for the quarter, measured in accordance with Generally Accepted Accounting Principles (GAAP), was $51.2 million, or $0.98 per diluted common share, compared to $44.0 million or $0.85 per diluted common share for the third quarter of 2011.  For the nine months ended September 30, 2012, reported net income was $139.6 million, or $2.68 per diluted common share, compared to $129.0 million, or $2.49 per diluted common share for the same period last year.

Operating earnings for the third quarter were $56.0 million, or $1.07 per diluted common share, compared to operating earnings of $44.0 million, or $0.85 per diluted common share for the third quarter of 2011. For the nine months ended September 30, 2012, operating earnings were $159.4 million, or $3.05 per diluted common share, compared to operating earnings of $129.0 million, or $2.49 per diluted common share for the same period last year.  Operating earnings are a non-GAAP measure that exclude the impact of after-tax expenses of approximately: 1) $4.8 million or $0.09 per diluted common share for the third quarter and $11.3 million or $0.21 per diluted common share for the nine months ended September 30, 2012 associated with the Entergy Corporation (Entergy) transaction and 2) $8.4 million or $0.16 per diluted common share for the nine months ended September 30, 2012 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.

Operating earnings increased by $12.0 million, or $0.22 per diluted common share, for the third quarter compared to the same period in 2011. For the nine months ended September 30, 2012, operating earnings increased $30.4 million, or $0.56 per diluted common share, compared to the same period 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 nine months ended September 30, 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 $626.2 million in capital projects at its operating companies during the first nine months of 2012, including $173.6 million, $113.6 million, $266.1 million and $72.9 million at ITCTransmission, METC, ITC Midwest and ITC Great Plains, respectively.

"We continued to make great strides against both our stand-alone strategic objectives and the Entergy transaction during the third quarter," said Joseph L. Welch, chairman, president and CEO of ITC.  "Our strong operational and financial performance reinforces our unwavering commitment to execution of our stand-alone plans, which benefit all of our constituents.  In addition, while delivering these results, we also made significant progress during the quarter on advancing the Entergy transaction to a successful close, further demonstrating our ability to effectively balance both of these priorities."

EPS and Capital Expenditure Guidance

For 2012, ITC is raising its full year operating earnings per share guidance to a range of $4.10 to $4.15, from the previous range of $3.95 to $4.05.  Capital investment guidance for 2012 has been updated to a range of $780 to $825 million, from the prior range of $750 to $820 million.  The updated guidance range includes capital forecasts at our regulated operating subsidiaries of $210 to $220 million, $150 to $160 million, $320 to $335 million and $100 to $110 million for ITCTransmission, METC, ITC Midwest and ITC Great Plains, respectively.

Third Quarter 2012 Operating Earnings Financial Results Detail

ITC's operating revenues for the third quarter increased to $214.8 million compared to $191.3 million for the third quarter of 2011. This increase was primarily due to higher revenue requirements attributable to a higher rate base at our regulated operating subsidiaries and higher recoverable operating expenses. In addition, regional cost sharing revenues increased due to additional capital projects being placed in-service that have been identified by MISO as eligible for regional cost sharing.

Operation and maintenance (O&M) expenses of $31.5 million decreased by $5.8 million compared to the same period in 2011. This decrease was primarily due to a decrease in expenses associated with transmission overhead lines surveys, lower field and site maintenance expenses, lower tower maintenance expenses and lower relay work for certain preventative maintenance activities. These decreases were partially offset by higher vegetation management requirements.

General and administrative (G&A) expenses of $20.6 million, which excludes $7.3 million of pre-tax expenses related to the Entergy transaction, were $1.6 million higher compared to the same period in 2011 due primarily to higher labor related expenses and higher professional services.

Depreciation and amortization expenses of $27.5 million increased by $3.6 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 $14.7 million were $2.3 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 $38.9 million increased by $1.7 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 third quarter of 2012 was 35.6 percent, excluding a reduction to income taxes of approximately $2.7 million associated with the Entergy transaction expenses compared to 34.0 percent for the same period last year.

Year-To-Date 2012 Financial Results Detail

ITC's operating revenues for the nine months ended September 30, 2012 increased to $619.9 million, excluding an $11.0 million reduction in revenues associated with the ITC Midwest FERC audit related refunds recorded for ITCTransmission, METC and ITC Midwest, compared to $555.8 million from 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 operating expenses. In addition, the increase resulted from higher regional cost sharing revenues primarily due to additional capital projects being placed into service that have been identified by MISO as eligible for regional cost sharing.  Partially offsetting these increases was the impact of the final monthly recognition of the ITCTransmission rate freeze revenue deferral in May 2011.

O&M expenses of $90.3 million were $2.2 million lower for the nine months ended September 30, 2012 compared to the same period in 2011. This decrease was primarily a result of lower field and site maintenance expenses, lower relay work for certain preventative maintenance activities, lower substation maintenance expenses, lower tower maintenance expenses and lower expenses associated with transmission overhead lines surveys. These decreases were partially offset by higher vegetation management requirements.

G&A expenses of $61.7 million, which excludes $17.1 million of pre-tax expenses related to the Entergy transaction, were $6.8 million higher compared to the same period in 2011. This increase was due to higher labor related expenses and higher general business expenses associated with increased information technology support and higher 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 $78.5 million increased by $8.1 million for the nine months ended September 30, 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 $44.2 million were $4.6 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 $115.7 million, which excludes the impact of $1.2 million of interest on the ITC Midwest FERC audit related refund recorded at ITCTransmission, METC and ITC Midwest, increased $5.7 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 nine months ended September 30, 2012 was 35.4 percent, excluding a reduction to income taxes of $10.7 million associated with the Entergy transaction and the ITC Midwest FERC audit related refund recorded at ITCTransmission, METC and ITC Midwest, compared to 35.5 percent for the same period in 2011.

Third Quarter Conference Call   

ITC will also conduct a webcast and conference call at 11 a.m. Eastern on Wednesday, October 24, 2012.  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 Monday, October 29, 2012, can be accessed by dialing 855-859-2056 (toll free) or 404-537-3406, passcode 38090652. The webcast will also be archived on the ITC website.

Other Available Information

More detail about the third 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, 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-Q 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. 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)


Three months ended


Nine months ended


September 30,


September 30,

(in thousands, except per share data)

2012


2011


2012


2011

OPERATING REVENUES

$

214,801



$

191,303



$

608,889



$

555,787


OPERATING EXPENSES








Operation and maintenance

31,544



37,365



90,314



92,486


General and administrative

27,906



19,046



78,791



54,915


Depreciation and amortization

27,466



23,898



78,453



70,338


Taxes other than income taxes

14,721



12,456



44,186



39,620


Other operating (income) and expense — net

(190)



(295)



(586)



(611)


Total operating expenses

101,447



92,470



291,158



256,748


OPERATING INCOME

113,354



98,833



317,731



299,039


OTHER EXPENSES (INCOME)








Interest expense

38,924



37,248



116,918



110,002


Allowance for equity funds used during construction

(5,622)



(4,469)



(15,800)



(12,078)


Other income

(884)



(1,417)



(2,171)



(2,136)


Other expense

1,415



793



2,473



3,063


Total other expenses (income)

33,833



32,155



101,420



98,851


INCOME BEFORE INCOME TAXES

79,521



66,678



216,311



200,188


INCOME TAX PROVISION

28,338



22,654



76,691



71,166


NET INCOME

$

51,183



$

44,024



$

139,620



$

129,022


Basic earnings per common share

$

0.99



$

0.86



$

2.72



$

2.52


Reported diluted earnings per common share

$

0.98



$

0.85



$

2.68



$

2.49


Operating diluted earnings per common share

$

1.07



$

0.85



$

3.05



$

2.49


Dividends declared per common share

$

0.3775



$

0.3525



$

1.0825



$

1.0225


 

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


Three months ended


Nine months ended


September 30,


September 30,


2012


2011


2012


2011

Reported net income

$

51,183



$

44,024



$

139,620



$

129,022


Pre-tax Entergy transaction related expenses


7,453




N/A




17,454




N/A


Pre-tax liability for audit related refund


N/A




N/A




13,048




N/A


Income taxes on adjustments


(2,662)




N/A




(10,739)




N/A


Operating earnings

$

55,974



$

44,024



$

159,383



$

129,022


 

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


Three months ended


Nine months ended


September 30,


September 30,


2012


2011


2012


2011

Reported diluted EPS

$

0.98



$

0.85



$

2.68



$

2.49


Pre-tax Entergy transaction related expenses


0.14




N/A




0.33




N/A


Pre-tax liability for audit related refund


            N/A




N/A




0.25




N/A


Income taxes on adjustments


(0.05)




N/A




(0.21)




N/A


Operating diluted EPS

$

1.07



$

0.85



$

3.05



$

2.49


 

ITC HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION  (UNAUDITED)


September 30,


December 31,

(in thousands, except share data)

2012


2011

ASSETS




Current assets




Cash and cash equivalents

$

30,026



$

58,344


Accounts receivable

94,863



76,895


Inventory

33,876



34,855


Deferred income taxes

21,045



20,636


Regulatory assets — revenue accruals, including accrued interest

7,267



6,639


Prepaid and other current assets

9,935



4,159


Total current assets

197,012



201,528


Property, plant and equipment (net of accumulated depreciation and amortization of $1,248,456 and $1,193,164, respectively)

3,967,190



3,415,823


Other assets




Goodwill

950,163



950,163


Intangible assets ( net of accumulated amortization of $17,607 and $15,276, respectively)

45,334



46,885


Other regulatory assets

171,057



161,987


Deferred financing fees (net of accumulated amortization of $16,949 and $14,594,   respectively)

19,593



20,989


Other

30,823



25,991


Total other assets

1,216,970



1,206,015


TOTAL ASSETS

$

5,381,172



$

4,823,366


LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities




Accounts payable


102,530




136,934


Accrued payroll

15,721



18,013


Accrued interest

43,395



43,642


Accrued taxes

18,370



25,627


Regulatory liabilities — revenue deferrals, including accrued interest

51,836



46,579


Refundable deposits from generators for transmission network upgrades

48,041



38,805


Debt maturing within one year

651,897



-


Other

51,040



5,867


Total current liabilities

982,830



315,467


Accrued pension and postretirement liabilities

44,299



44,923


Deferred income taxes

432,677



373,268


Regulatory liabilities — revenue deferrals, including accrued interest

68,324



50,917


Regulatory liabilities — accrued asset removal costs

79,492



83,934


Refundable deposits from generators for transmission network upgrades

5,241



14,570


Other

12,426



36,373


Long-term debt

2,406,674



2,645,022


STOCKHOLDERS' EQUITY




Common stock, without par value, 100,000,000 shares authorized, 51,524,437 and 51,323,368   shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively.

955,258



943,444


Retained earnings

414,759



330,816


Accumulated other comprehensive loss

(20,808)



(15,368)


Total stockholders' equity

1,349,209



1,258,892


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

5,381,172



$

4,823,366













 

ITC HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


Nine months ended


September 30,

(in thousands)

2012


2011

CASH FLOWS FROM OPERATING ACTIVITIES




Net income

$

139,620



$

129,022

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




Depreciation and amortization expense

78,453



70,338

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

25,748



82,854

Deferred income tax expense

44,921



44,894

Allowance for equity funds used during construction

(15,800)



(12,078)

Other

9,030



12,224

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




Accounts receivable

(12,182)



(14,845)

Inventory

979



1,807

Prepaid and other current assets

(5,776)



(171)

Accounts payable

(10,637)



2,853

Accrued payroll

(1,865)



(3,753)

Accrued interest

(247)



(19,384)

Accrued taxes

(5,773)



(7,315)

Other current liabilities

11,474



1,699

Other non-current assets and liabilities, net

410



(1,577)

Net cash provided by operating activities

258,355



286,568

CASH FLOWS FROM INVESTING ACTIVITIES




Expenditures for property, plant and equipment

(637,386)



(388,402)

Proceeds from sale of securities

5,935



3,839

Purchases of securities

(10,786)



(7,341)

Other

(747)



769

Net cash used in investing activities

(642,984)



(391,135)

CASH FLOWS FROM FINANCING ACTIVITIES




Issuance of long-term debt

100,000



-

Borrowings under revolving credit agreements

1,073,550



592,515

Borrowings under term loan credit agreement

200,000



-

Repayments of revolving credit agreements

(960,350)



(512,355)

Issuance of common stock

4,929



18,081

Dividends on common stock

(55,677)



(52,276)

Refundable deposits from generators for transmission network upgrades

31,157



24,618

Repayment of refundable deposits from generators for transmission network upgrades

(31,186)



(4,876)

Other

(6,112)



(7,922)

Net cash provided by  financing activities

356,311



57,785

NET DECREASE IN CASH AND CASH EQUIVALENTS

(28,318)



(46,782)

CASH AND CASH EQUIVALENTS — Beginning of period

58,344



95,109

CASH AND CASH EQUIVALENTS — End of period

$

30,026



$

48,327










 

SOURCE ITC Holdings Corp.



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