ITC Reports Continued Strong Performance for Third Quarter and Year-to-Date 2015 Results

05 Nov, 2015, 06:30 ET from ITC Holdings Corp.

NOVI, Mich., Nov. 5, 2015 /PRNewswire/ --

Highlights

  • Third quarter 2015 operating earnings of $0.53 per diluted common share increased over the same period last year; third quarter 2015 reported earnings of $0.42 per diluted common share
  • Operating earnings for the nine months ended September 30, 2015 of $1.51 per diluted common share increased over the same period last year; reported earnings for the nine months ended September 30, 2015 of $1.31 per diluted common share
  • Capital investments of $501.4 million for the nine months ended September 30, 2015
  • 2015 operating earnings per share guidance of $2.00 to $2.15 per diluted share remains unchanged and the capital investment guidance revised to $715 to $765 million
  • Announced accelerated share repurchase of $115 million

 


Three months ended


Nine months ended

(in thousands, except per share data)

September 30,


September 30,


2015


2014


2015


2014

OPERATING REVENUES

$

273,189



$

270,134



$

820,734



$

791,951


REPORTED NET INCOME

$

65,573



$

73,873



$

205,041



$

197,345


OPERATING EARNINGS

$

82,334



$

73,664



$

236,214



$

216,126


REPORTED DILUTED EPS

$

0.42



$

0.47



$

1.31



$

1.25


OPERATING DILUTED EPS

$

0.53



$

0.47



$

1.51



$

1.36



ITC Holdings Corp. (NYSE: ITC) announced today its results for the third quarter and nine month period ended September 30, 2015. 

Reported net income for the third quarter, measured in accordance with Generally Accepted Accounting Principles (GAAP), was $65.6 million, or $0.42 per diluted common share, compared to $73.9 million or $0.47 per diluted common share for the third quarter of 2014. For the nine months ended September 30, 2015, reported net income was $205.0 million, or $1.31 per diluted common share, compared to $197.3 million, or $1.25 per diluted common share for the same period last year.

Operating earnings for the third quarter were $82.3 million, or $0.53 per diluted common share, compared to operating earnings of $73.7 million, or $0.47 per diluted common share for the third quarter of 2014. For the nine months ended September 30, 2015, operating earnings were $236.2 million, or $1.51 per diluted common share, compared to operating earnings of $216.1 million, or $1.36 per diluted common share for the same period last year.

ITC invested $501.4 million in capital projects during the nine month period ended September 30, 2015, including $120.2 million at ITCTransmission, $91.6 million at METC, $273.9 million at ITC Midwest, $11.6 million at ITC Great Plains and $4.1 million of Development and Other.

"During the third quarter, we continued to execute on our strategy to invest in critical transmission infrastructure, including base and regional capital, while delivering operational excellence at all of our operating companies," said Joseph L. Welch, chairman, president and CEO of ITC. "We also remain focused on prudent value return as evidenced by the 15% dividend increase this quarter as well as the $115 million accelerated share repurchase program that will be completed by the end of the year."

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 impacts were approximately $(0.1) million for the third quarter of 2014. These expenses total $0.6 million for the nine months ended September 30, 2014.
  2. Regulatory charges of approximately $5.5 million, or $0.04 per diluted common share for the third quarter of 2015. These expenses totaled $6.6 million, or $0.04 per diluted common share for the nine months ended September 30, 2015 and $0.1 million for the nine months ended September 30, 2014. Of the 2015 charges, $1.1 million relates to management's decision to write-off abandoned project costs at ITCTransmission and $5.5 million relates to a refund liability attributable to contributions in aid of construction (CIAC refund liability). The 2014 charge relates to certain acquisition accounting adjustments for ITC Midwest, ITCTransmission, and METC resulting from the FERC audit order on ITC Midwest issued in May 2012.
  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.
  4. The estimated refund liability associated with the Midcontinent ISO (MISO) regional base ROE rate (the "base ROE") of $11.2 million, or $0.07 per diluted common share, and $24.5 million, or $0.16 per diluted common share, for the third quarter and nine month period ended September 30, 2015, respectively. The refund liability reflects the estimated refund obligation associated with the base ROE 206 complaints.

Operating earnings for the third quarter and nine month period ended September 30, 2015 increased by $8.6 million, or $0.06 per diluted common share, and $20.1 million, or $0.15 per diluted common share, compared with the same period last year. The increases compared to the prior period were largely attributable to higher income associated with increased rate base at our operating companies, partially offset by non-recoverable bonus payments expensed primarily in the first quarter associated with completion of the Kansas V-Plan Project at ITC Great Plains in December of 2014 coupled with higher professional services for various development initiatives. Absent the Kansas V-Plan Project bonus payments, year-over-year operating earnings would have increased by approximately 14% year-to-date.

Share Repurchase On September 30, 2015, ITC entered into an accelerated share repurchase (ASR) program for $115 million, which is expected to be completed by the end of 2015. Under the ASR program, ITC received an initial delivery of 2.8 million shares on October 1, 2015, with a market value of $92 million. The final number of shares delivered under the ASR program will be based on the volume-weighted average share price of our common stock during the term of the transaction, less an agreed upon discount and adjusted for the initial share delivery.

2015 EPS and Capital Investment Guidance For 2015, ITC's full year operating earnings per share guidance of $2.00 to $2.15 remains unchanged. ITC is revising its 2015 capital guidance range to a range of $715 to $765 million from the previous range of $710 to $810 million. The revised range includes $180 to $190 million for ITCTransmission, $155 to $170 million for METC, $370 to $385 million for ITC Midwest, $10 to $15 million for ITC Great Plains and up to $5 million of Development and Other.

Third Quarter 2015 Operating Earnings Financial Results Detail — Non-GAAP Measure ITC's operating revenues for the third quarter of 2015 increased to $299.8 million compared to $270.1 million for the third quarter of 2014. Amounts reported for the third quarter of 2015 exclude approximately $18.0 million in reduced pre-tax revenues associated with the base ROE refund liability and $8.6 million in reduced pre-tax revenues associated with the CIAC refund liability. This increase was primarily due to higher revenue requirements attributable to a 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 MISO as eligible for regional cost sharing.

Operation and maintenance (O&M) expenses of $32.7 million were $3.7 million higher than the same period in 2014. The increase in O&M expenses was primarily due to higher vegetation management requirements and higher expenses associated with substation and overhead line maintenance activities.

General and administrative (G&A) expenses of $33.7 million were $4.7 million higher compared to the same period in 2014. Amounts reported for the third quarter 2014 were impacted by $(0.2) million of pre-tax activity related to the Entergy transaction. The increase in G&A expenses was primarily due to higher compensation expenses related to personnel additions and higher professional services for various development initiatives.

Depreciation and amortization expenses of $36.9 million increased by $5.0 million compared to the same period in 2014 due to a higher depreciable base resulting from property, plant and equipment in-service additions.

Taxes other than income taxes of $20.5 million were $1.3 million higher than the same period in 2014. This increase was due to 2014 capital additions at our regulated operating subsidiaries, which are included in the assessment for 2015 personal property taxes.

Interest expense of $50.1 million increased by $2.8 million compared to the same period in 2014. Amounts reported for the third quarter of 2015 exclude $1.3 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 2015 was 37.4 percent compared to 37.7 percent for the same period last year. Amounts reported for the third quarter of 2015 exclude income taxes of approximately $11.1 million associated with adjustments to operating earnings.

Year-to-Date 2015 Operating Earnings Financial Results Detail — Non-GAAP Measure ITC's operating revenues for the nine months ended September 30, 2015 increased to $868.1 million compared to $792.0 million from the same period last year. Amounts reported for the nine months ended September 30, 2015 exclude approximately $38.8 million in reduced pre-tax revenues associated with the base ROE refund liability and $8.6 million in pre-tax revenues associated with the CIAC refund liability. This increase was primarily due to higher revenue requirements attributable to a 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 $88.3 million were $8.6 million higher for the nine months ended September 30, 2015 compared to the same period in 2014. The increase in O&M expenses was primarily due to higher vegetation management requirements and higher expenses associated with substation and overhead line maintenance activities.

G&A expenses of $105.6 million were $19.5 million higher compared to the same period in 2014. Amounts reported for the nine months ended September 30, 2015 exclude approximately $1.5 million of pre-tax expenses related to regulatory charges and the nine months ended September 30, 2014 exclude approximately $1.0 million of pre-tax expenses associated with the Entergy transaction. The increase in G&A expenses was primarily due to incentive-based compensation for bonus payments associated with completion of the Kansas V-Plan Project at ITC Great Plains in December of 2014 and higher professional services for various development initiatives.

Depreciation and amortization expenses of $106.9 million increased by $12.3 million for the nine months ended September 30, 2015 compared to the same period in 2014 due to a higher depreciable base resulting from property, plant and equipment in-service additions.

Taxes other than income taxes of $61.6 million were $4.1 million higher compared to the same period in 2014. This increase was due to 2014 capital additions at our regulated operating subsidiaries, which are included in the assessment for 2015 personal property taxes.

Interest expense of $147.8 million was $9.5 million higher compared to the same period in 2014. Amounts reported for the nine months ended September 30, 2015 and 2014 exclude approximately $2.3 million and $0.2 million, respectively, of pre-tax expenses associated with the adjustments to operating earnings noted previously. The increase in interest expense was due primarily to higher borrowing levels to finance capital investments.

The effective income tax rate for the nine months ended September 30, 2015 was 37.5 percent compared to 38.0 percent for the same period in 2014. Amounts reported for the nine months ended September 30, 2015 and 2014 exclude income taxes of $20.0 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, November 5, 2015. 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 November 10, 2015, can be accessed by dialing 855-859-2056 (toll free) or 404-537-3406, passcode 51993117. The webcast will be archived on the ITC website.

Other Available Information More detail about third quarter 2015 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. Additionally, a calendar of our future earnings calls can be found at our website, http://investor.itc-holdings.com.

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. Through its regulated operating subsidiaries ITCTransmission, Michigan Electric Transmission Company, ITC Midwest and ITC Great Plains, 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 approximately 15,600 circuit miles of transmission line. ITC's grid development focus includes growth through regulated infrastructure investment as well as domestic and international expansion through merchant and other commercial development opportunities. 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 that operating earnings, or GAAP earnings adjusted for specific items as described in the release that are generally not indicative of our core operations, provides additional information that is useful to investors in understanding ITC's underlying performance, business and performance trends, and helps facilitate period to period comparisons. However, non-GAAP financial measures are not required to be uniformly applied, are not audited and 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 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.

 

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)

2015

2014

2015

2014

OPERATING REVENUES

$

273,189

$

270,134

$

820,734

$

791,951

OPERATING EXPENSES

Operation and maintenance

32,721

29,038

88,309

79,735

General and administrative

33,677

28,812

107,064

87,082

Depreciation and amortization

36,890

31,936

106,903

94,609

Taxes other than income taxes

20,463

19,205

61,629

57,474

Other operating (income) and expenses — net

(206)

(289)

(675)

(750)

Total operating expenses

123,545

108,702

363,230

318,150

OPERATING INCOME

149,644

161,432

457,504

473,801

OTHER EXPENSES (INCOME)

Interest expense — net

51,398

47,328

150,070

138,491

Allowance for equity funds used during construction

(6,421)

(4,921)

(21,434)

(14,865)

Loss on extinguishment of debt

29,074

Other income

(384)

(244)

(804)

(618)

Other expense

1,372

761

2,969

3,696

Total other expenses (income)

45,965

42,924

130,801

155,778

INCOME BEFORE INCOME TAXES

103,679

118,508

326,703

318,023

INCOME TAX PROVISION

38,106

44,635

121,662

120,678

NET INCOME

$

65,573

$

73,873

$

205,041

$

197,345

Basic earnings per common share

$

0.42

$

0.47

$

1.32

$

1.26

Diluted earnings per common share

$

0.42

$

0.47

$

1.31

$

1.25

Operating diluted earnings per common share

$

0.53

$

0.47

$

1.51

$

1.36

Dividends declared per common share

$

0.1875

$

0.1625

$

0.5125

$

0.4475

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

Three months ended

Nine months ended

September 30,

September 30,

2015

2014

2015

2014

Reported net income (GAAP)

$

65,573

$

73,873

$

205,041

$

197,345

After-tax Entergy transaction related expenses

(143)

601

After-tax regulatory charges

5,549

6,632

132

After-tax debt extinguishment & consent solicitation fees

(66)

18,048

After-tax MISO regional base ROE rate refund liability

11,212

24,541

Operating earnings (non-GAAP)

$

82,334

$

73,664

$

236,214

$

216,126

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

Three months ended

Nine months ended

September 30,

September 30,

2015

2014

2015

2014

Reported diluted EPS (GAAP)

$

0.42

$

0.47

$

1.31

$

1.25

After-tax Entergy transaction related expenses

After-tax regulatory charges

0.04

0.04

After-tax debt extinguishment & consent solicitation fees

0.11

After-tax MISO regional base ROE rate refund liability

0.07

0.16

Operating diluted EPS (non-GAAP)

$

0.53

$

0.47

$

1.51

$

1.36

 

 

ITC HOLDINGS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)

September 30,

December 31,

(in thousands, except share data)

2015

2014

ASSETS

Current assets

Cash and cash equivalents

$

24,167

$

27,741

Accounts receivable

124,310

100,998

Inventory

29,491

30,892

Deferred income taxes

17,002

14,511

Regulatory assets

12,378

5,393

Prepaid and other current assets

11,598

7,281

Total current assets

218,946

186,816

Property, plant and equipment (net of accumulated depreciation and amortization    of $1,466,591 and $1,388,217, respectively)

5,890,138

5,496,875

Other assets

Goodwill

950,163

950,163

Intangible assets (net of accumulated amortization of $27,411 and $24,917,    respectively)

46,325

48,794

Regulatory assets

224,913

223,712

Deferred financing fees (net of accumulated amortization of $16,504 and    $15,972, respectively)

30,222

30,311

Other

44,892

37,418

Total other assets

1,296,515

1,290,398

TOTAL ASSETS

$

7,405,599

$

6,974,089

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable

$

108,828

$

107,969

Accrued payroll

20,660

23,502

Accrued interest

41,642

50,538

Accrued taxes

26,048

41,614

Regulatory liabilities

43,607

39,972

Refundable deposits from generators for transmission network upgrades

2,657

10,376

Debt maturing within one year

694,327

175,000

Other

11,531

14,043

Total current liabilities

949,300

463,014

Accrued pension and postretirement liabilities

70,833

69,562

Deferred income taxes

746,179

656,562

Regulatory liabilities

210,811

160,070

Refundable deposits from generators for transmission network upgrades

9,039

9,384

Other

27,695

17,354

Long-term debt

3,709,878

3,928,586

Commitments and contingent liabilities

STOCKHOLDERS' EQUITY

Common stock, without par value, 300,000,000 shares authorized, 156,177,085    and 155,140,967 shares issued and outstanding at September 30, 2015 and    December 31, 2014, respectively

811,037

923,191

Retained earnings

866,900

741,550

Accumulated other comprehensive income

3,927

4,816

Total stockholders' equity

1,681,864

1,669,557

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

7,405,599

$

6,974,089

 

 

ITC HOLDINGS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)

Nine months ended

September 30,

(in thousands)

2015

2014

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$

205,041

$

197,345

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

Depreciation and amortization expense

106,903

94,609

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

1,164

29,175

Deferred income tax expense

76,103

86,935

Allowance for equity funds used during construction

(21,434)

(14,865)

Loss on extinguishment of debt

29,074

Other

14,950

15,474

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

Accounts receivable

(24,523)

(24,057)

Inventory

1,401

1,423

Prepaid and other current assets

(4,317)

3,377

Accounts payable

(1,120)

(16,382)

Accrued payroll

(1,520)

(1,710)

Accrued interest

(8,896)

(18,161)

Accrued taxes

(15,566)

(3,156)

Other current liabilities

132

(13,486)

Other non-current assets and liabilities, net

57,970

(4,694)

Net cash provided by operating activities

386,288

360,901

CASH FLOWS FROM INVESTING ACTIVITIES

Expenditures for property, plant and equipment

(460,110)

(549,599)

Other

(14,969)

(2,667)

Net cash used in investing activities

(475,079)

(552,266)

CASH FLOWS FROM FINANCING ACTIVITIES

Issuance of long-term debt

225,000

498,664

Borrowings under revolving credit agreements

909,400

1,397,800

Borrowings under term loan credit agreements

110,000

Net issuance of commercial paper

218,983

Retirement of long-term debt — including extinguishment of debt costs

(248,494)

Repayments of revolving credit agreements

(1,053,200)

(1,319,500)

Repayments under term loan credit agreements

(39,000)

Issuance of common stock

12,322

19,666

Dividends on common and restricted stock

(79,697)

(70,279)

Refundable deposits from generators for transmission network upgrades

3,458

5,833

Repayment of refundable deposits from generators for transmission network    upgrades

(11,442)

(22,155)

Repurchase and retirement of common stock

(21,931)

(108,136)

Forward contracts of accelerated share repurchase program

(115,000)

(46,000)

Other

(2,676)

(9,713)

Net cash provided by financing activities

85,217

168,686

NET DECREASE IN CASH AND CASH EQUIVALENTS

(3,574)

(22,679)

CASH AND CASH EQUIVALENTS — Beginning of period

27,741

34,275

CASH AND CASH EQUIVALENTS — End of period

$

24,167

$

11,596

 

 

SOURCE ITC Holdings Corp.



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