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

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

PR Newswire

NOVI, Mich., Feb. 27, 2013

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

Highlights

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

(in thousands, except per share      Three months ended  Twelve months ended
data)
                                     December 31,          December 31,
                                     2012        2011      2012       2011
OPERATING REVENUES                   $221,646    $201,610  $830,535   $757,397
REPORTED NET INCOME                  $48,256     $42,663   $187,876   $171,685
OPERATING EARNINGS                   $56,913     $44,863   $216,296   $174,048
REPORTED DILUTED EPS ^               $0.92       $0.82     $3.60      $3.31
OPERATING DILUTED EPS                $1.09       $0.86     $4.14      $3.35

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

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

  oAfter-tax expenses associated with the Entergy Corporation (Entergy)
    transaction of approximately $8.6 million or $0.17 per diluted common
    share and $20.1 million or $0.38 per diluted common share for the fourth
    quarter and year ended December 31, 2012, respectively, and approximately
    $7.0 million, or $0.13 per share for both the fourth quarter and year
    ended December 31, 2011.
  oAfter-tax expenses associated with the estimated refund liability recorded
    for certain acquisition accounting adjustments for ITC Midwest,
    ITCTransmission and METC resulting from the FERC audit order on ITC
    Midwest issued in May 2012 of approximately $8.3 million or $0.16 per
    diluted common share for the year ended December 31, 2012.
  oAn after-tax gain associated with the adoption of the Michigan Corporate
    Income Tax (CIT) of approximately $4.6 million or $0.09 per share for both
    the fourth quarter and year ended December 31, 2011.

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

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

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

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

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

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

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

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

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

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

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

Year-End 2012 Operating Earnings Financial Results Detail
ITC's operating revenues for the year ended December 31, 2012 increased to
$841.5 million, excluding approximately $11.0 million in reduction to revenues
associated with the ITC Midwest FERC audit related refunds recorded for
ITCTransmission, METC and ITC Midwest, compared to $757.4 million from the
same period last year. This increase was primarily due to higher revenue
requirements attributable to higher rate base at our regulated operating
subsidiaries and higher recoverable operating expenses, as well as an increase
in regional cost sharing revenues due to additional capital projects being
placed in-service that have been identified by MISO as eligible for regional
cost sharing. Partially offsetting these increases was the impact of the
elimination of the amortization of the ITCTransmission rate freeze revenue
deferral in May 2011.

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

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

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

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

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

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

Fourth Quarter and Year-End Conference Call and Webcast
ITC will conduct a webcast and conference call at 11 a.m. Eastern on Thursday,
February 28, 2013. Joseph L. Welch, chairman, president and CEO, will provide
a business overview, and Cameron M. Bready, executive vice president and CFO,
will discuss the financial results. Individuals wishing to participate in the
conference call may dial toll-free 877-644-1296 (domestic) or 914-495-8555
(international); there is no passcode. A listen-only live webcast of the
conference call, including accompanying slides and the earnings release, will
be available on the company's investor information page. The conference call
replay, available through Tuesday, March 5, 2013, can be accessed by dialing
855-859-2056 (toll free) or 404-537-3406, passcode 93804905. The webcast will
be archived on the ITC website.

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

About ITC Holdings Corp.
ITC Holdings Corp. (NYSE: ITC) is the nation's largest independent electric
transmission company. Based in Novi, Michigan, ITC invests in the electric
transmission grid to improve reliability, expand access to markets, lower the
overall cost of delivered energy and allow new generating resources to
interconnect to its transmission systems. ITC's regulated operating
subsidiaries include ITCTransmission, Michigan Electric Transmission Company,
ITC Midwest and ITC Great Plains. Through these subsidiaries, ITC owns and
operates high-voltage transmission facilities in Michigan, Iowa, Minnesota,
Illinois, Missouri, Kansas and Oklahoma, serving a combined peak load
exceeding 26,000 megawatts along 15,000 circuit miles of transmission line.
Through ITC Grid Development and its subsidiaries, the company also focuses on
expansion in areas where significant transmission system improvements are
needed. For more information, please visit ITC's website at 
www.itc-holdings.com. (itc-ITC)

GAAP v. Non-GAAP Measures
ITC's reported earnings are prepared in accordance with GAAP and represent
earnings as reported to the Securities and Exchange Commission. ITC's
management believes the company's operating earnings, or GAAP earnings
adjusted for specific items as described in the release, provide a more
meaningful representation of the company's fundamental earnings power.
However, such measures should not be considered in isolation or as substitutes
for results prepared in accordance with GAAP.

Safe Harbor Statement
This press release contains certain statements that describe our management's
beliefs concerning future business conditions, plans and prospects, growth
opportunities and the outlook for our business and the electricity
transmission industry based upon information currently available. Such
statements are "forward-looking" statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Wherever possible, we have
identified these forward-looking statements by words such as "will," "may,"
"anticipates," "believes," "intends," "estimates," "expects," "projects" and
similar phrases. These forward-looking statements are based upon assumptions
our management believes are reasonable. Such forward looking statements are
subject to risks and uncertainties which could cause our actual results,
performance and achievements to differ materially from those expressed in, or
implied by, these statements, including, among others, the risks and
uncertainties disclosed in our Form 10-K filed with the Securities and
Exchange Commission.

Because our forward-looking statements are based on estimates and assumptions
that are subject to significant business, economic and competitive
uncertainties, many of which are beyond our control or are subject to change,
actual results could be materially different and any or all of our
forward-looking statements may turn out to be wrong. Forward-looking
statements speak only as of the date made and can be affected by assumptions
we might make or by known or unknown risks and uncertainties. Many factors
mentioned in our discussion in this release and in our annual and quarterly
reports will be important in determining future results. Consequently, we
cannot assure you that our expectations or forecasts expressed in such
forward-looking statements will be achieved. Except as required by law, we
undertake no obligation to publicly update any of our forward-looking or other
statements, whether as a result of new information, future events, or
otherwise.



ITC HOLDINGS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

                               Three months ended      Twelve months ended
                               December 31,            December 31,
(in thousands, except per      2012        2011        2012        2011
share data)
OPERATING REVENUES             $ 221,646   $ 201,610   $ 830,535   $  757,397
OPERATING EXPENSES
Operation and maintenance      31,627      36,802      121,941     129,288
General and administrative     33,300      27,875      112,091     82,790
Depreciation and amortization  28,059      24,643      106,512     94,981
Taxes other than income taxes  15,515      13,810      59,701      53,430
Other operating (income)and   (183)       (233)       (769)       (844)
expense — net
Total operating expenses       108,318     102,897     399,476     359,645
OPERATING INCOME               113,328     98,713      431,059     397,752
OTHER EXPENSES (INCOME)
Interest expense               38,816      36,927      155,734     146,936
Allowance for equity funds     (7,200)     (4,621)     (23,000)    (16,699)
used during construction
Other income                   15          (692)       (2,401)     (2,881)
Other expense                  1,500       853         4,218       3,962
Total other expenses (income)  33,131      32,467      134,551     131,318
INCOME BEFORE INCOME TAXES     80,197      66,246      296,508     266,434
INCOME TAX PROVISION           31,941      23,583      108,632     94,749
NET INCOME                     $ 48,256    $ 42,663    $ 187,876   $ 171,685
Basic earnings per common      $ 0.93      $ 0.83      $ 3.65      $ 3.36
share
Reported diluted earnings per  $ 0.92      $ 0.82      $ 3.60      $ 3.31
common share
Operating diluted earnings per $ 1.09      $ 0.86      $ 4.14      $ 3.35
common share
Dividends declared per common  $ 0.378     $ 0.353     $ 1.460     $ 1.375
share

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

                                Three months ended     Twelve months ended
                                December 31,           December 31,
                                2012       2011        2012         2011
Reported net income             $ 48,256   $ 42,663    $ 187,876    $ 171,685
Pre-tax Entergy transaction       9,100      8,416       26,555       8,616
related expenses
Pre-tax liability for audit       102        -           13,150       -
related refund
One-time CIT adjustment           -          (4,652)     -            (4,652)
Income taxes on adjustments       (545)      (1,564)     (11,285)     (1,601)
Operating earnings              $ 56,913   $ 44,863    $ 216,296    $ 174,048

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

                                      Three months ended  Twelve months ended
                                      December 31,        December 31,
                                      2012     2011       2012       2011
Reported diluted EPS                  $ 0.92   $ 0.82     $ 3.60     $ 3.31
Pre-tax Entergy transaction related     0.17     0.16       0.51       0.16
expenses
Pre-tax liability for audit related     -        -          0.25       -
refund
One-time CIT adjustment                 -        (0.09)     -          (0.09)
Income taxes on adjustments             -        (0.03)     (0.22)     (0.03)
Operating diluted EPS                 $ 1.09   $ 0.86     $ 4.14     $ 3.35



ITC HOLDINGS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

                                       December31,         December31,
(in thousands, except share data)      2012                 2011
ASSETS
Current assets
Cash and cash equivalents              $      26,187  $     58,344
Accounts receivable                    72,192               76,895
Inventory                              37,357               34,855
Deferred income taxes                  23,014               20,636
Regulatory assets — revenue accruals,  7,489                6,639
including accrued interest
Prepaid assets                         29,235               4,129
Other                                  2,752                30
Total current assets                   198,226              201,528
Property, plant and equipment (net of
accumulated depreciation and           4,134,579            3,415,823
amortization of $1,269,810 and
$1,193,164, respectively)
Other assets
Goodwill                               950,163              950,163
Intangible assets ( net of
accumulated amortization of $18,397    48,492               46,885
and $15,276, respectively)
Other regulatory assets                180,378              161,987
Deferred financing fees (net of
accumulated amortization of $17,838    19,293               20,989
and $14,594, respectively)
Other                                  33,678               25,991
Total other assets                     1,232,004            1,206,015
TOTAL ASSETS                           $    5,564,809    $   4,823,366
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable                       $     123,022   $     136,934
Accrued payroll                        20,740               18,013
Accrued interest                       44,708               43,642
Accrued taxes                          28,117               25,627
Regulatory liabilities — revenue       53,763               46,579
deferrals, including accrued interest
Refundable deposits from generators    40,745               38,805
for transmission network upgrades
Debt maturing within one year          651,929              -
Other                                  40,287               5,867
Total current liabilities              1,003,311            315,467
Accrued pension and postretirement     53,243               44,923
liabilities
Deferred income taxes                  460,072              373,268
Regulatory liabilities — revenue       28,613               50,917
deferrals, including accrued interest
Regulatory liabilities — accrued       75,477               83,934
asset removal costs
Refundable deposits from generators    7,623                14,570
for transmission network upgrades
Other                                  26,317               36,373
Long-term debt                         2,495,298            2,645,022
STOCKHOLDERS' EQUITY
Common stock, without par value,
100,000,000 shares authorized,
52,248,514 and 51,323,368 shares      989,334              943,444
issued and outstanding at December
31, 2012 and 2011, respectively
Retained earnings                      443,569              330,816
Accumulated other comprehensive loss   (18,048)             (15,368)
Total stockholders' equity             1,414,855            1,258,892
TOTAL LIABILITIES AND STOCKHOLDERS'    $    5,564,809    $   4,823,366
EQUITY

ITC HOLDINGS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

                                     Twelve months ended
                                     December31,
(in thousands)                       2012                2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                           $      187,876       $      171,685
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization        106,512              94,981
expense
Recognition, refund and collection
of revenue accruals and deferrals —  (13,052)             56,944
including accrued interest
Deferred income tax expense          67,285               30,797
Allowance for equity funds used      (23,000)             (16,699)
during construction
Other – net                          13,772               13,361
Changes in assets and liabilities,
exclusive of changes shown
separately:
Accounts receivable                  1,721                2,434
Inventory                            (2,502)              7,431
Prepaid and other current assets     (25,102)             1,134
Accounts payable                     (5,400)              12,573
Accrued payroll                      1,583                (1,096)
Accrued interest                     1,066                917
Accrued taxes                        24,247               34,279
Tax benefit for excess tax
deductions of share-based            (23,022)             (28,114)
compensation
Other current liabilities            2,912                (246)
Other non-current assets and         12,627               535
liabilities, net
Net cash provided by operating       327,523              380,916
activities
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and (802,763)            (556,931)
equipment
Proceeds from sale of securities     5,935                3,839
Purchases of securities              (11,779)             (8,136)
Other                                (454)                1,033
Net cash used in investing           (809,061)            (560,195)
activities
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of long-term debt           175,000              -
Borrowings under revolving credit    1,355,150            1,065,215
agreements
Borrowings under term loan credit    200,000              -
agreement
Repayments of revolving credit       (1,228,410)          (917,555)
agreements
Issuance of common stock             14,189               18,993
Dividends on common stock            (75,153)             (70,363)
Refundable deposits from generators  33,310               35,768
for transmission network upgrades
Repayment of refundable deposits
from generators for transmission     (38,253)             (6,976)
network upgrades
Tax benefit for excess tax
deductions of share-based            23,022               28,114
compensation
Other                                (9,474)              (10,682)
Net cash provided by financing       449,381              142,514
activities
NET DECREASE IN CASH AND CASH        (32,157)             (36,765)
EQUIVALENTS
CASH AND CASH EQUIVALENTS —          58,344               95,109
Beginning of period
CASH AND CASH EQUIVALENTS — End of   $      26,187   $      58,344
period





SOURCE ITC Holdings Corp.

Website: http://www.itc-holdings.com
Contact: Investor/Analyst contact: Gretchen Holloway, +1-248-946-3595;
gholloway@itctransco.com; Media contact: Robert Doetsch, +1-248-946-3493;
rdoetsch@itctransco.com
 
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