ITC Reports Continued Strong Growth for Second Quarter and Year-to-Date 2015 Results

Jul 30, 2015, 08:30 ET from ITC Holdings Corp.

NOVI, Mich., July 30, 2015 /PRNewswire/ --

Highlights

  • Second quarter 2015 operating earnings of $0.52 per diluted common share increased over the same period last year; second quarter 2015 reported earnings of $0.46 per diluted common share
  • Operating earnings for the six months ended June 30, 2015 of $0.98 per diluted common share increased over the same period last year; reported earnings for the six months ended June 30, 2015 of $0.89 per diluted common share
  • Capital investments of $331 million for the six months ended June 30, 2015
  • Reaffirmed 2015 operating earnings per share guidance of $2.00 to $2.15 per diluted share and capital investment guidance of $710 to $810 million

Three months ended


Six months ended

(in thousands, except per share data)

June 30,


June 30,


2015


2014


2015


2014

OPERATING REVENUES

$

275,058



$

263,214



$

547,545



$

521,817


REPORTED NET INCOME

$

72,336



$

54,336



$

139,468



$

123,472


OPERATING EARNINGS

$

80,823



$

72,695



$

153,880



$

142,462


REPORTED DILUTED EPS

$

0.46



$

0.34



$

0.89



$

0.78


OPERATING DILUTED EPS

$

0.52



$

0.46



$

0.98



$

0.90


ITC Holdings Corp. (NYSE: ITC) announced today its results for the second quarter and six month period ended June 30, 2015. 

Reported net income for the second quarter, measured in accordance with Generally Accepted Accounting Principles (GAAP), was $72.3 million, or $0.46 per diluted common share, compared to $54.3 million or $0.34 per diluted common share for the second quarter of 2014. For the six months ended June 30, 2015, reported net income was $139.5 million, or $0.89 per diluted common share, compared to $123.5 million, or $0.78 per diluted common share for the same period last year.

Operating earnings for the second quarter were $80.8 million, or $0.52 per diluted common share, compared to operating earnings of $72.7 million, or $0.46 per diluted common share for the second quarter of 2014. For the six months ended June 30, 2015, operating earnings were $153.9 million, or $0.98 per diluted common share, compared to operating earnings of $142.5 million, or $0.90 per diluted common share for the same period last year.

ITC invested $331 million in capital projects during the six month period ended June 30, 2015, including $82.8 million at ITCTransmission, $51.2 million at METC, $182.9 million at ITC Midwest, $10.0 million at ITC Great Plains and $4.1 million of Development and Other.

"We are pleased to report another strong quarter in which we met our operational and financial targets," said Joseph L. Welch, chairman, president and CEO of ITC. "During the second quarter, we completed the largest project in ITC's history, the Thumb Loop project at ITCTransmission ahead of schedule and under budget, while also delivering operational excellence to our customers and superior growth to our shareholders."

Operating Earnings

Operating earnings are non-GAAP measures that exclude the impact of after-tax expenses associated with the following items:

  1. The Entergy Corporation transaction expenses of approximately $0.2 million for the second quarter of 2014. These expenses total $0.7 million for the six months ended June 30, 2014.
  2. Regulatory charges of approximately $1.1 million, or $0.01 per diluted common share, for the six months ended June 30, 2015 and $0.1 million for both the second quarter and six month period ended June 30, 2014. The 2015 charge relates to management's decision to write-off abandoned project costs at ITCTransmission. 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 $18.1 million, or $0.12 per diluted common share, for both the second quarter and six month period ended June 30, 2014.
  4. The estimated refund liability associated with the Midcontinent ISO (MISO) regional base ROE rate (the "base ROE") of $8.5 million, or $0.06 per diluted common share, and $13.3 million, or $0.08 per diluted common share, for the second quarter and six month period ended June 30, 2015, respectively. The refund liability reflects the estimated refund obligation associated with the base ROE 206 complaints.

Operating earnings for the second quarter and six month period ended June 30, 2015 increased by $8.1 million, or $0.06 per diluted common share, and $11.4 million, or $0.08 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. Absent the Kansas V-Plan Project bonus payments, year-over-year operating earnings would have increased by approximately 14% year-to-date.

Balance Sheet Activities   ITC Holdings established an ongoing commercial paper program on June 8, 2015, under which unsecured commercial paper can be issued and sold in an aggregate amount not to exceed $400.0 million outstanding at any one time. As of June 30, 2015, ITC Holdings had approximately $50.0 million of commercial paper issued and outstanding under the program. The proceeds from the issuance were used for general corporate purposes, including the repayment of borrowings under ITC Holdings' revolving credit agreement.

2015 EPS and Capital Investment Guidance   For 2015, ITC is reaffirming its full year operating earnings per share guidance of $2.00 to $2.15. ITC is also reaffirming its 2015 capital guidance range of $710 to $810 million, which includes $170 to $200 million for ITCTransmission, $150 to $170 million for METC, $380 to $405 million for ITC Midwest, $10 to $25 million for ITC Great Plains and up to $10 million of Development and Other.

Second Quarter 2015 Operating Earnings Financial Results Detail — non-GAAP Measure   ITC's operating revenues for the second quarter of 2015 increased to $288.4 million compared to $263.2 million for the second quarter of 2014. Amounts reported for the second quarter of 2015 exclude approximately $13.3 million in reduced pre-tax revenues associated with the base ROE 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 the MISO as eligible for regional cost sharing.

Operation and maintenance (O&M) expenses of $30.0 million were $4.2 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 $32.5 million were $2.5 million higher compared to the same period in 2014. Amounts reported for the second quarter 2014 exclude $0.3 million of pre-tax expenses related to the Entergy transaction. The increase in G&A expenses was primarily due to higher compensation expenses related to personnel additions.

Depreciation and amortization expenses of $35.6 million increased by $4.3 million compared to the same period in 2014 due to a higher depreciable base resulting from property, plant and equipment additions.

Taxes other than income taxes of $18.8 million were $1.7 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 tax base for 2015 personal property tax calculations.

Interest expense of $49.7 million increased by $3.9 million compared to the same period in 2014. Amounts reported for the second quarter of 2015 and 2014 exclude $0.5 million and $0.1 million, respectively, 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 second quarter of 2015 was 37.5 percent compared to 37.9 percent for the same period last year. Amounts reported for the second quarter of 2015 and 2014 exclude income taxes of approximately $5.3 million and $11.1 million, respectively, associated with adjustments to operating earnings.

Year-to-Date 2015 Operating Earnings Financial Results Detail — non-GAAP Measure  ITC's operating revenues for the six months ended June 30, 2015 increased to $568.3 million compared to $521.8 million from the same period last year. Amounts reported for the six months ended June 30, 2015 exclude approximately $20.8 million in reduced pre-tax revenues associated with the base ROE 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 $55.6 million were $4.9 million higher for the six months ended June 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 $71.9 million were $14.9 million higher compared to the same period in 2014. Amounts reported for the six months ended June 30, 2015 exclude approximately $1.5 million of pre-tax expenses related to regulatory charges and the six months ended June 30, 2014 exclude approximately $1.3 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.

Depreciation and amortization expenses of $70.0 million increased by $7.3 million for the six months ended June 30, 2015 compared to the same period in 2014 due to a higher depreciable base resulting from property, plant and equipment additions.

Taxes other than income taxes of $41.2 million were $2.9 million higher compared to the same period in 2014. This increase was due to 2014 capital additions made at our regulated operating subsidiaries, which are included in the tax base for 2015 personal property taxes.

Interest expense of $97.8 million was $6.8 million higher compared to the same period in 2014. Amounts reported for the six months ended June 30, 2015 and 2014 exclude approximately $0.9 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 six months ended June 30, 2015 was 37.5 percent compared to 38.1 percent for the same period in 2014. Amounts reported for the six months ended June 30, 2015 and 2014 exclude income taxes of $8.8 million and $11.6 million, respectively, associated with adjustments to operating earnings noted previously.

Second 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 second quarter results in a conference call at 11 a.m. Eastern on Thursday, July 30, 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 August 4, 2015, can be accessed by dialing 855-859-2056 (toll free) or 404-537-3406, passcode 66293148. The webcast will be archived on the ITC website.

Other Available Information  More detail about second 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

Six months ended

June 30,

June 30,

(in thousands, except per share data)

2015

2014

2015

2014

OPERATING REVENUES

$

275,058

$

263,214

$

547,545

$

521,817

OPERATING EXPENSES

Operation and maintenance

30,026

25,836

55,588

50,697

General and administrative

32,493

30,308

73,387

58,270

Depreciation and amortization

35,578

31,295

70,013

62,673

Taxes other than income taxes

18,786

17,076

41,166

38,269

Other operating (income) and expenses — net

(233)

(229)

(469)

(461)

Total operating expenses

116,650

104,286

239,685

209,448

OPERATING INCOME

158,408

158,928

307,860

312,369

OTHER EXPENSES (INCOME)

Interest expense — net

50,198

45,854

98,672

91,163

Allowance for equity funds used during construction

(7,464)

(4,932)

(15,013)

(9,944)

Loss on extinguishment of debt

29,074

29,074

Other income

(189)

(236)

(438)

(397)

Other expense

431

1,625

1,615

2,958

Total other expenses (income)

42,976

71,385

84,836

112,854

INCOME BEFORE INCOME TAXES

115,432

87,543

223,024

199,515

INCOME TAX PROVISION

43,096

33,207

83,556

76,043

NET INCOME

$

72,336

$

54,336

$

139,468

$

123,472

Basic earnings per common share

$

0.47

$

0.34

$

0.90

$

0.78

Diluted earnings per common share

$

0.46

$

0.34

$

0.89

$

0.78

Operating diluted earnings per common share

$

0.52

$

0.46

$

0.98

$

0.90

Dividends declared per common share

$

0.1625

$

0.1425

$

0.3250

$

0.2850

 

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

 

Three months ended

Six months ended

June 30,

June 30,

2015

2014

2015

2014

Reported net income (GAAP)

$

72,336

$

54,336

$

139,468

$

123,472

After-tax Entergy transaction related expenses

179

744

After-tax regulatory charges

66

1,083

132

After-tax debt extinguishment & consent solicitation fees

18,114

18,114

After-tax MISO regional base ROE rate refund liability

8,487

13,329

Operating earnings (non-GAAP)

$

80,823

$

72,695

$

153,880

$

142,462

 

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

 

Three months ended

Six months ended

June 30,

June 30,

2015

2014

2015

2014

Reported diluted EPS (GAAP)

$

0.46

$

0.34

$

0.89

$

0.78

After-tax Entergy transaction related expenses

After-tax regulatory charges

0.01

After-tax debt extinguishment & consent solicitation fees

0.12

0.12

After-tax MISO regional base ROE rate refund liability

0.06

0.08

Operating diluted EPS (non-GAAP)

$

0.52

$

0.46

$

0.98

$

0.90

 

 

ITC HOLDINGS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)

 

June 30,

December 31,

(in thousands, except share data)

2015

2014

ASSETS

Current assets

Cash and cash equivalents

$

12,790

$

27,741

Accounts receivable

119,168

100,998

Inventory

29,566

30,892

Deferred income taxes

16,072

14,511

Regulatory assets

8,974

5,393

Prepaid and other current assets

15,449

7,281

Total current assets

202,019

186,816

Property, plant and equipment (net of accumulated depreciation and amortization   of $1,438,404 and $1,388,217, respectively)

5,751,630

5,496,875

Other assets

Goodwill

950,163

950,163

Intangible assets (net of accumulated amortization of $26,579 and $24,917,    respectively)

47,142

48,794

Regulatory assets

242,162

223,712

Deferred financing fees (net of accumulated amortization of $15,520 and    $15,972, respectively)

30,890

30,311

Other

59,214

37,418

Total other assets

1,329,571

1,290,398

TOTAL ASSETS

$

7,283,220

$

6,974,089

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable

$

96,677

$

107,969

Accrued payroll

16,389

23,502

Accrued interest

52,231

50,538

Accrued taxes

43,923

41,614

Regulatory liabilities

37,328

39,972

Refundable deposits from generators for transmission network upgrades

2,451

10,376

Debt maturing within one year

224,974

175,000

Other

6,094

14,043

Total current liabilities

480,067

463,014

Accrued pension and postretirement liabilities

70,197

69,562

Deferred income taxes

714,376

656,562

Regulatory liabilities

170,720

160,070

Refundable deposits from generators for transmission network upgrades

8,379

9,384

Other

18,814

17,354

Long-term debt

4,063,277

3,928,586

Commitments and contingent liabilities

STOCKHOLDERS' EQUITY

Common stock, without par value, 300,000,000 shares authorized, 156,060,906    and 155,140,967 shares issued and outstanding at June 30, 2015 and    December 31, 2014, respectively

920,807

923,191

Retained earnings

830,505

741,550

Accumulated other comprehensive income

6,078

4,816

Total stockholders' equity

1,757,390

1,669,557

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

7,283,220

$

6,974,089

 

 

 

ITC HOLDINGS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)

 

Six months ended

June 30,

(in thousands)

2015

2014

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$

139,468

$

123,472

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

Depreciation and amortization expense

70,013

62,673

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

(31,867)

(7,248)

Deferred income tax expense

47,979

56,978

Allowance for equity funds used during construction

(15,013)

(9,944)

Loss on extinguishment of debt

29,074

Other

10,863

8,142

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

Accounts receivable

(19,758)

(28,890)

Inventory

1,326

2,611

Prepaid and other current assets

(8,166)

(9,623)

Accounts payable

(581)

(21,394)

Accrued payroll

(4,497)

(3,524)

Accrued interest

1,693

(1,951)

Accrued taxes

2,310

10,869

Other current liabilities

(532)

(9,370)

Other non-current assets and liabilities, net

4,161

(5,903)

Net cash provided by operating activities

197,399

195,972

CASH FLOWS FROM INVESTING ACTIVITIES

Expenditures for property, plant and equipment

(318,187)

(375,650)

Other

(5,542)

235

Net cash used in investing activities

(323,729)

(375,415)

CASH FLOWS FROM FINANCING ACTIVITIES

Issuance of long-term debt

225,000

473,664

Borrowings under revolving credit agreements

638,500

1,054,100

Borrowings under term loan credit agreements

110,000

Proceeds from commercial paper

49,974

Retirement of long-term debt — including debt retirement costs

(198,494)

Repayments of revolving credit agreements

(729,100)

(1,035,300)

Repayments under term loan credit agreements

(39,000)

Issuance of common stock

10,704

14,177

Dividends on common and restricted stock

(50,467)

(44,983)

Refundable deposits from generators for transmission network upgrades

981

5,208

Repayment of refundable deposits from generators for transmission network    upgrades

(9,831)

(22,155)

Repurchase and retirement of common stock

(21,838)

(107,952)

Forward contract of accelerated share repurchase program

(46,000)

Other

(2,544)

(9,080)

Net cash provided by financing activities

111,379

154,185

NET DECREASE IN CASH AND CASH EQUIVALENTS

(14,951)

(25,258)

CASH AND CASH EQUIVALENTS — Beginning of period

27,741

34,275

CASH AND CASH EQUIVALENTS — End of period

$

12,790

$

9,017

 

 

 

SOURCE ITC Holdings Corp.



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