ITC Holdings Reports Second Quarter And Year-to-Date 2012 Results

Jul 31, 2012, 17:42 ET from ITC Holdings Corp.

NOVI, Mich., July 31, 2012 /PRNewswire/ --

Highlights

  • Operating earnings for the second quarter of $1.05 per diluted common share; reported earnings for the second quarter of $0.81 per diluted common share
  • Operating earnings for the six months ended June 30, 2012 of $1.98 per diluted common share; reported earnings for the six months ended June 30, 2012 of $1.70 per diluted common share
  • Capital investments of $429.2 million for the six months ended June 30, 2012
  • 2012 operating earnings guidance updated to $3.95 to $4.05 per diluted common share and capital expenditure guidance updated to $750 to $820 million

(in thousands, except per share data)

Three months ended

June 30,


Six months ended

June 30,


2012


2011


2012


2011

OPERATING REVENUES

$197,375


$185,098


$394,088


$364,484









REPORTED NET INCOME

$42,386


$42,996


$88,437


$84,998









OPERATING EARNINGS

$54,795


$42,996


$103,375


$84,998









REPORTED DILUTED EPS

$0.81


$0.83


$1.70


$1.64









OPERATING DILUTED EPS

$1.05


$0.83


$1.98


$1.64

ITC Holdings Corp. (NYSE: ITC) today announced its results for the second quarter and six month period ended June 30, 2012. Reported net income for the quarter, measured in accordance with Generally Accepted Accounting Principles (GAAP), was $42.4 million, or $0.81 per diluted common share, compared to $43.0 million or $0.83 per diluted common share for the second quarter of 2011.  For the six months ended June 30, 2012, reported net income was $88.4 million, or $1.70 per diluted common share, compared to $85.0 million, or $1.64 per diluted common share for the same period last year.

Operating earnings for the second quarter were $54.8 million, or $1.05 per diluted common share, compared to operating earnings of $43.0 million, or $0.83 per diluted common share for the second quarter of 2011. For the six months ended June 30, 2012, operating earnings were $103.4 million, or $1.98 per diluted common share, compared to operating earnings of $85.0 million, or $1.64 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) $4.0 million or $0.08 per diluted common share for the second quarter and $6.6 million or $0.12 per diluted common diluted share for the six months ended June 30, 2012 associated with the Entergy Corporation (Entergy) transaction and 2) $8.4 million or $0.16 per diluted common share for both the second quarter and the six months ended June 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 $11.8 million, or $0.22 per diluted common share, for the second quarter compared to the same period in 2011. For the six months ended June 30, 2012, operating earnings increased $18.4 million, or $0.34 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 and slightly lower effective tax rates, partially offset by lower revenues associated with the amortization of the ITCTransmission rate freeze revenue deferral which expired in May 2011.   

For the six months ended June 30, 2012, ITC invested $429.2 million in capital projects at its operating companies, including $104.9 million, $84.6 million, $182.2 million and $57.5 million at ITCTransmission, METC, ITC Midwest and ITC Great Plains, respectively.

"Our business performed very well during the second quarter of 2012 and we continue to make solid progress on our key near-term strategic objectives, including our stand-alone capital investment plans and advancing the Entergy transaction towards closing," said Joseph L. Welch, chairman, president and CEO of ITC.  "I remain pleased with our execution against our stand-alone plans, which are benefiting our customers by providing a more reliable and robust transmission system, particularly during the warm summer weather periods we have experienced.  In addition, final preparations are underway to initiate our retail jurisdictional regulatory applications associated with the Entergy transaction.  Based on our current anticipated timeline for the approval process, we remain confident in our ability to close the transaction in 2013."

EPS and Capital Expenditure Guidance For 2012, ITC is updating its full year operating earnings guidance to a range of $3.95 to $4.05 per share from the prior range of $3.90 to $4.05 per share. In addition, aggregate capital investment guidance for 2012 is also being updated to a range of $750 to $820 million from the prior range of $730 to $830 million. The updated guidance range includes $195 to $215 million, $145 to $160 million, $315 to $335 million and $95 to $110 million for ITCTransmission, METC, ITC Midwest and ITC Great Plains, respectively.

Second Quarter 2012 Operating Earnings Financial Results Detail ITC's operating revenues for the second quarter increased to $208.4 million, which excludes 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 $185.1 million for the second 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. Partially offsetting these increases was the impact of the elimination of the amortization of the ITCTransmission rate freeze revenue deferral in May 2011.

Operation and maintenance (O&M) expenses of $30.1 million increased by $1.3 million compared to the same period in 2011.  This increase was due to higher vegetation management activities, partially offset by a decrease in relay work and reduced substation maintenance expenses.

General and administrative (G&A) expenses of $21.9 million, which excludes $6.0 million of pre-tax expenses related to the Entergy transaction, were $2.6 million higher compared to the same period in 2011 due to higher compensation-related expenses and higher general business expenses primarily related to increased information technology support.

Depreciation and amortization expenses of $26.0 million increased by $2.6 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 $15.2 million were $1.6 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 $39.0 million, which excludes the impact of $1.1 million of pre-tax expenses associated with interest on the ITC Midwest FERC audit related refund recorded at ITCTransmission, METC and ITC Midwest, increased by $2.5 million compared to the same period in 2011 due primarily to higher borrowing levels to finance capital expenditures.

The effective income tax rate for the second quarter of 2012 was 33.9 percent, excluding a reduction to income taxes of approximately $6.7 million associated with the Entergy transaction expenses and the ITC Midwest FERC audit related refund recorded at ITCTransmission, METC and ITC Midwest, compared to 35.6 percent for the same period last year.

Year-To-Date 2012 Financial Results Detail ITC's operating revenues for the six months ended June 30, 2012 increased to $405.1, which excludes 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 $364.5 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 $58.8 million were $3.7 million higher for the six months ended June 30, 2012 compared to the same period in 2011. This increase was a result of higher vegetation management activities and higher NERC compliance activities associated with surveying overhead transmission lines.  These increases were partially offset by a decrease in relay work and reduced substation maintenance expenses.

G&A expenses of $41.1 million, which excludes $9.8 million of pre-tax expenses related to the Entergy transaction, were $5.2 million higher compared to the same period in 2011.  This increase was primarily due to higher general business expenses primarily related to increased information technology support, higher compensation-related expenses and 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 $51.0 million increased by $4.6 million for the six months ended June 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 $29.5 million were $2.3 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 $76.9 million, which excludes the impact of $1.1 million of interest on the ITC Midwest FERC audit related refund recorded at ITCTransmission, METC and ITC Midwest, increased $4.1 million compared to the same period in 2011 due primarily to higher borrowing levels to finance capital expenditures.

The effective income tax rate for the six months ended June 30, 2012 was 35.3 percent, excluding a reduction to income taxes of $8.1 million associated with the Entergy transaction and the ITC Midwest FERC audit related refund recorded at ITCTransmission, METC and ITC Midwest, compared to 36.3 percent in 2011.

Second Quarter Conference Call ITC will also conduct a webcast and conference call at 11 a.m. Eastern on Wednesday, August 1, 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, August 6, 2012, can be accessed by dialing 855-859-2056 (toll free) or 404-537-3406, passcode 96932924. The webcast will also be archived on the ITC website.

Other Available Information More detail about the second 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

Six months ended

June 30,

June 30,

(in thousands, except per share data)

2012

2011

2012

2011

OPERATING REVENUES

$

197,375

$

185,098

$

394,088

$

364,484

OPERATING EXPENSES

Operation and maintenance

30,058

28,837

58,770

55,121

General and administrative

27,876

19,289

50,885

35,869

Depreciation and amortization

25,976

23,352

50,987

46,440

Taxes other than income taxes

15,185

13,556

29,465

27,164

Other operating income and expense — net

(203)

(167)

(396)

(316)

Total operating expenses

98,892

84,867

189,711

164,278

OPERATING INCOME

98,483

100,231

204,377

200,206

OTHER EXPENSES (INCOME)

Interest expense

40,084

36,484

77,994

72,754

Allowance for equity funds used during construction

(4,554)

(4,099)

(10,178)

(7,609)

Other income

(1,226)

(497)

(1,287)

(718)

Other expense

472

1,594

1,058

2,269

Total other expenses (income)

34,776

33,482

67,587

66,696

INCOME BEFORE INCOME TAXES

63,707

66,749

136,790

133,510

INCOME TAX PROVISION

21,321

23,753

48,353

48,512

NET INCOME

$

42,386

$

42,996

$

88,437

$

84,998

Basic earnings per common share

$

0.82

$

0.84

$

1.72

$

1.67

Reported diluted earnings per common share

$

0.81

$

0.83

$

1.70

$

1.64

Operating diluted earnings per common share

$

1.05

$

0.83

$

1.98

$

1.64

Dividends declared per common share

$

0.353

$

0.335

$

0.705

$

0.670

 

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

Three months ended

Six months ended

June 30,

June 30,

2012

2011

2012

2011

Reported net income

$

42,386

$

42,996

$

88,437

$

84,998

Pre-tax Entergy transaction related expenses

6,139

N/A

10,001

N/A

Pre-tax liability for audit related refund

12,993

N/A

12,993

N/A

Income taxes on adjustments

(6,723)

N/A

(8,056)

N/A

Operating earnings

$

54,795

$

42,996

$

103,375

$

84,998

 

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

Three months ended

Six months ended

June 30,

June 30,

2012

2011

2012

2011

Reported diluted EPS

$

0.81

$

0.83

$

1.70

$

1.64

Pre-tax Entergy transaction related expenses

0.12

N/A

0.19

N/A

Pre-tax liability for audit related refund

0.25

N/A

0.25

N/A

Income taxes on adjustments

(0.13)

N/A

(0.16)

N/A

Operating diluted EPS

$

1.05

$

0.83

$

1.98

$

1.64

 

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

June 30,

December 31,

(in thousands, except share data)

2012

2011

ASSETS

Current assets

Cash and cash equivalents

$

38,518

$

58,344

Accounts receivable

110,458

76,895

Inventory

35,045

34,855

Deferred income taxes

21,503

20,636

Regulatory assets — revenue accruals, including accrued interest

6,163

6,639

Prepaid assets

19,327

4,128

Other

37

31

Total current assets

231,051

201,528

Property, plant and equipment (net of accumulated depreciation and amortization of

   $1,230,248 and $1,193,164, respectively)

3,798,197

3,415,823

Other assets

Goodwill

950,163

950,163

Intangible assets ( net of accumulated amortization of $16,828 and $15,276, respectively)

46,113

46,885

Regulatory assets – revenue accruals, including accrued interest

10,940

5,637

Other regulatory assets

170,320

161,987

Deferred financing fees (net of accumulated amortization of $16,062 and $14,594, 

   respectively)

20,477

20,989

Other

26,963

20,354

Total other assets

1,224,976

1,206,015

TOTAL ASSETS

$

5,254,224

$

4,823,366

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable

128,239

136,934

Accrued payroll

14,300

18,013

Accrued interest

59,844

43,642

Accrued taxes

30,460

25,627

Regulatory liabilities — revenue deferrals, including accrued interest

49,206

46,579

Refundable deposits from generators for transmission network upgrades

59,363

38,805

Other

14,689

5,867

Total current liabilities

356,101

315,467

Accrued pension and postretirement liabilities

41,689

44,923

Deferred income taxes

416,521

373,268

Regulatory liabilities — revenue deferrals, including accrued interest

36,299

50,917

Regulatory liabilities — accrued asset removal costs

80,607

83,934

Refundable deposits from generators for transmission network upgrades

2,296

14,570

Other

43,501

36,373

Long-term debt

2,963,304

2,645,022

STOCKHOLDERS' EQUITY

Common stock, with par value, 100,000,000 shares authorized, 51,489,481 and 51,323,368 

   shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively

950,383

943,444

Retained earnings

383,015

330,816

Accumulated other comprehensive loss

(19,492)

(15,368)

Total stockholders' equity

1,313,906

1,258,892

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

5,254,224

$

4,823,366

 

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

Six months ended

June 30,

(in thousands)

2012

2011

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$

88,437

$

84,998

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

Depreciation and amortization expense

50,987

46,440

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

   interest

(16,818)

18,116

Deferred income tax expense

30,728

31,421

Allowance for equity funds used during construction

(10,178)

(7,609)

Other

6,171

7,554

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

Accounts receivable

(24,551)

(16,036)

Inventory

(190)

2,537

Prepaid assets

(15,198)

(4,034)

Other current assets

(6)

2,432

Accounts payable

(2,437)

969

Accrued payroll

(2,187)

(5,143)

Accrued interest

16,202

304

Accrued taxes

5,914

10,292

Other current liabilities

8,822

(2,012)

Other non-current assets and liabilities, net

(1,995)

(2,444)

Net cash provided by operating activities

133,701

167,785

CASH FLOWS FROM INVESTING ACTIVITIES

Expenditures for property, plant and equipment

(435,745)

(228,028)

Proceeds from sale of securities

5,453

3,809

Purchases of securities

(10,105)

(7,160)

Other

(881)

578

Net cash used in investing activities

(441,278)

(230,801)

CASH FLOWS FROM FINANCING ACTIVITIES

Issuance of long-term debt

100,000

-

Borrowings under revolving credit agreements

723,350

377,415

Repayments of revolving credit agreements

(505,300)

(308,775)

Issuance of common stock

2,831

15,025

Dividends on common stock

(36,238)

(34,189)

Refundable deposits from generators for transmission network upgrades

22,114

9,054

Repayment of refundable deposits from generators for transmission network upgrades

(13,830)

(4,876)

Other

(5,176)

(4,512)

Net cash provided by financing activities

287,751

49,142

NET DECREASE IN CASH AND CASH EQUIVALENTS

(19,826)

(13,874)

CASH AND CASH EQUIVALENTS — Beginning of period

58,344

95,109

CASH AND CASH EQUIVALENTS — End of period

$

38,518

$

81,235

 

 

SOURCE ITC Holdings Corp.



RELATED LINKS

http://www.itc-holdings.com