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ITC Holdings Reports Increased Third Quarter and Year-To-Date 2013 Results; Updates 2013 Operating Earnings Per Share Guidance

 ITC Holdings Reports Increased Third Quarter and Year-To-Date 2013 Results;
 Updates 2013 Operating Earnings Per Share Guidance and 2013 Capital Guidance

PR Newswire

NOVI, Mich., Oct. 31, 2013

NOVI, Mich., Oct. 31, 2013 /PRNewswire/ --

Highlights

  oOperating earnings for the third quarter of $1.26 per diluted common
    share; reported earnings for the third quarter of $1.12 per diluted common
    share
  oOperating earnings for the nine months ended September 30, 2013 of $3.57
    per diluted common share; reported earnings for the nine months ended
    September 30, 2013 of $2.96 per diluted common share
  oCapital investments of $648.9 million for the nine months ended September
    30, 2013
  o2013 operating earnings per share guidance updated to $4.84 to $4.92 per
    share
  o2013 capital investment guidance updated to a range of $810 to $860
    million

(in thousands, except   Three months ended           Nine months ended
per share data)         September 30,
                                                     September 30,
                        2013           2012          2013         2012
OPERATING REVENUES      $  238,782    $  214,801   $  685,903  $  608,889
REPORTED NET INCOME     $   58,984   $   51,183  $  156,569  $  139,620
OPERATING EARNINGS      $  66,510    $   56,059  $  188,644  $  159,518
REPORTED DILUTED EPS ^  $    1.12  $         $        $    
                                       0.98          2.96         2.68
OPERATING DILUTED EPS   $    1.26  $         $        $    3.05
                                       1.07          3.57

ITC Holdings Corp. (NYSE: ITC) today announced its results for the third
quarter and nine month period ended September 30, 2013. Reported net income
for the quarter, measured in accordance with Generally Accepted Accounting
Principles (GAAP), was $59.0 million, or $1.12 per diluted common share,
compared to $51.2 million or $0.98 per diluted common share for the third
quarter of 2012. For the nine months ended September 30, 2013, reported net
income was $156.6 million, or $2.96 per diluted common share, compared to
$139.6 million, or $2.68 per diluted common share for the same period last
year.

Operating earnings for the third quarter of 2013 were $66.5 million, or $1.26
per diluted common share, compared to $56.1 million, or $1.07 per diluted
common share for the third quarter of 2012. For the nine months ended
September 30, 2013, operating earnings were $188.6 million, or $3.57 per
diluted common share, compared to $159.5 million, or $3.05 per diluted common
share for the same period last year. Operating earnings are a non-GAAP
measure that exclude the impact of the following after-tax expenses associated
with:

  oThe Entergy Corporation (Entergy) transaction of approximately $7.5
    million or $0.14 per diluted common share, and $5.0 million or $0.09 per
    diluted common share, for the third quarter 2013 and 2012, respectively.
    These expenses totaled approximately $31.9 million or $0.61 per diluted
    common share and $11.6 million, or $0.21 per diluted common share, for the
    nine months ended September 30, 2013 and 2012, respectively.
  oAn estimated refund liability of approximately $0.1 million for the third
    quarter 2013 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. For the nine months ended September 30,
    2013 and 2012, amounts recorded associated with this matter totaled $0.2
    million and $8.3 million or $0.16 per diluted common share respectively.
    

Operating earnings increased by $10.5 million, or $0.19 per diluted common
share, for the third quarter compared to the same period in 2012. For the nine
months ended September 30, 2013, operating earnings increased $29.1 million,
or $0.52 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,
resulting from the continued execution of our capital investment plans.

ITC invested $648.9 million in capital projects at its operating companies
during the first nine months of 2013, including $170.7 million at
ITCTransmission, $127.8 million at METC, $245.8 million at ITC Midwest and
$104.6 million at ITC Great Plains.

"Thus far, 2013 has proven to be a demanding year for us as we seek to
continue to execute on our stand-alone initiatives while also advancing the
Entergy transaction towards a successful close," said Joseph L. Welch,
chairman, president and CEO of ITC. "I am very pleased with how the
organization has risen to meet this challenge and believe that we are
well-positioned to meet our operational and financial objectives for the
year. We are also continuing to navigate the complex regulatory approval
process for the Entergy transaction and hope to make meaningful progress with
these efforts by year-end."

EPS and Capital Expenditure Guidance
For 2013, ITC is updating its full year operating earnings per share guidance
to a range of $4.84 to $4.92, from the previous range of $4.80 to $5.00.
Capital investment guidance for 2013 has also been updated to a range of $810
to $860 million, from the prior range of $760 to $860 million. The updated
guidance range includes capital forecasts at our regulated operating
subsidiaries of $215 to $230 million for ITCTransmission, $170 to $180 million
for METC, $285 to $300 million for ITC Midwest and $140 to $150 million for
ITC Great Plains.

Third Quarter 2013 Operating Earnings Financial Results Detail
ITC's operating revenues for the third quarter increased to $238.8 million
compared to $214.8 million for the third quarter of 2012. This increase was
primarily due to higher revenue requirements attributable to higher rate base
at our regulated operating subsidiaries. In addition, regional cost sharing
revenues increased due to additional capital projects being placed in-service
that have been identified as eligible for regional cost sharing.

Operation and maintenance (O&M) expenses of $29.7 million decreased by $1.8
million compared to the same period in 2012. This decrease was primarily due
to lower vegetation management requirements and lower NERC compliance
activities associated with surveying overhead transmission lines.

General and administrative (G&A) expenses of $22.9 million were $2.4 million
higher compared to the same period in 2012. The amounts for the third quarter
2013 and 2012 exclude approximately $9.0 million and $7.4 million,
respectively, associated with adjustments to operating earnings relating to
Entergy transaction costs noted previously. This increase was primarily due
to higher general business expenses, including an increase in information
technology expenses and higher labor related expenses associated with
personnel increases. These increases were partially offset by lower outside
legal fees.

Depreciation and amortization expenses of $29.8 million increased by $2.3
million compared to the same period in 2012 due to a higher depreciable base
resulting from property, plant and equipment additions.

Taxes other than income taxes of $16.7 million were $2.0 million higher than
the same period in 2012. This increase was due to 2012 capital additions at
our regulated operating subsidiaries, which are included in the tax base for
2013 personal property taxes.

Interest expense of $43.0 million increased by $4.3 million compared to the
same period in 2012. The amounts for the third quarter 2013 and 2012 exclude
approximately $1.1 million and $0.2 million, respectively, associated with
adjustments to operating earnings noted previously. This increase was due
primarily to higher borrowing levels to finance capital investments.

The effective income tax rate for the third quarter of 2013 was 35.9 percent
compared to 35.7 percent for the same period last year. The amounts for the
third quarter 2013 and 2012 exclude approximately $2.6 million and $2.7
million, respectively, associated with adjustments to operating earnings noted
previously.

Year-To-Date 2013 Financial Results Detail
ITC's operating revenues for the nine months ended September 30, 2013
increased to $685.9 million compared to $619.9 million for the same period
last year, which amount excludes an $11.0 million reduction in revenues
associated with the ITC Midwest FERC audit-related refunds recorded for
ITCTransmission, METC and ITC Midwest. This increase was primarily due to
higher network revenues attributable to higher rate base at all of our
regulated operating subsidiaries. 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 as eligible for
regional cost sharing.

O&M expenses of $83.9 million were $6.4 million lower for the nine months
ended September 30, 2013 compared to the same period in 2012. This decrease
was primarily due to lower vegetation management requirements and lower NERC
compliance activities associated with surveying overhead transmission lines.

G&A expenses of $68.9 million were $7.5 million higher compared to the same
period in 2012. The amounts for 2013 and 2012 exclude approximately $41.9
million and $17.4 million, respectively, associated with adjustments to
operating earnings relating to Entergy transaction costs noted previously.
This increase was due to higher labor related expenses associated with
personnel increases and higher professional services associated with legal,
advisory and financial service fees.

Depreciation and amortization expenses of $87.6 million increased by $9.1
million for the nine months ended September 30, 2013 compared to the same
period in 2012. This increase was primarily due to a higher depreciable base
resulting from property, plant and equipment additions.

Taxes other than income taxes of $49.5 million were $5.3 million higher
compared to the same period in 2012. This increase was due to 2012 capital
additions at our regulated operating subsidiaries, which are included in the
tax base for 2013 personal property taxes.

Interest expense of $121.8 million increased by $6.3 million compared to the
same period in 2012. The amounts for year-to-date 2013 and 2012 exclude
approximately $1.7 million and $1.4 million, respectively, associated with
adjustments to operating earnings noted previously. This increase was due
primarily to higher borrowing levels to finance capital investments.

The effective income tax rate for the nine months ended September 30, 2013 was
36.2 percent compared to 35.4 percent for the same period in 2012. The amounts
for year-to-date 2013 and 2012 exclude approximately $11.6 million and $10.8
million, respectively, associated with adjustments to operating earnings noted
previously.

Third Quarter Conference Call
ITC will also conduct a webcast and conference call at 11 a.m. Eastern on
Thursday, October 31, 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 Friday,
November 8, 2013, can be accessed by dialing 855-859-2056 (toll free) or
404-537-3406, passcode 82749220. The webcast will also be archived on the ITC
website.

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

About ITC Holdings Corp.
ITC Holdings Corp. (NYSE: ITC) is the nation's largest independent electric
transmission company. Based in Novi, Michigan, ITC invests in the electric
transmission grid to improve reliability, expand access to markets, lower the
overall cost of delivered energy and allow new generating resources to
interconnect to its transmission systems. ITC's regulated operating
subsidiaries include ITCTransmission, Michigan Electric Transmission Company,
ITC Midwest and ITC Great Plains. Through these subsidiaries, ITC owns and
operates high-voltage transmission facilities in Michigan, Iowa, Minnesota,
Illinois, Missouri, Kansas and Oklahoma, serving a combined peak load
exceeding 26,000 megawatts along 15,000 circuit miles of transmission line.
Through ITC Grid Development and its subsidiaries, the company also focuses on
expansion in areas where significant transmission system improvements are
needed. For more information, please visit ITC's website at 
www.itc-holdings.com. (ITC-itc-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 the company's operating earnings, or GAAP earnings
adjusted for specific items as described in the release, provide a more
meaningful representation of the company's fundamental earnings power.
However, such measures should not be considered in isolation or as substitutes
for results prepared in accordance with GAAP.

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

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



ITC HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                                Three months ended      Nine months ended
                                September 30,           September 30,
(in thousands, except per share 2013        2012        2013        2012
data)
OPERATING REVENUES              $ 238,782   $ 214,801   $ 685,903   $ 608,889
OPERATING EXPENSES
Operation and maintenance       29,725      31,544      83,906      90,314
General and administrative      31,902      27,906      110,767     78,791
Depreciation and amortization   29,802      27,466      87,583      78,453
Taxes other than income taxes   16,728      14,721      49,492      44,186
Other operating (income)and    (197)       (190)       (542)       (586)
expense — net
Total operating expenses        107,960     101,447     331,206     291,158
OPERATING INCOME                130,822     113,354     354,697     317,731
OTHER EXPENSES (INCOME)
Interest expense - net          44,062      38,924      123,527     116,918
Allowance for equity funds used (8,290)     (5,622)     (25,315)    (15,800)
during construction
Other income                    (786)       (884)       (824)       (2,171)
Other expense                   2,164       1,415       5,388       2,473
Total other expenses (income)   37,150      33,833      102,776     101,420
INCOME BEFORE INCOME TAXES      93,672      79,521      251,921     216,311
INCOME TAX PROVISION            34,688      28,338      95,352      76,691
NET INCOME                      $ 58,984    $ 51,183    $ 156,569   $ 139,620
Basic earnings per common share $ 1.12      $ 0.99      $ 2.99      $ 2.72
Reported diluted earnings per   $ 1.12      $ 0.98      $ 2.96      $ 2.68
common share
Operating diluted earnings per  $ 1.26      $ 1.07      $ 3.57      $ 3.05
common share
Dividends declared per common   $ 0.4250    $ 0.3775    $ 1.1800    $ 1.0825
share



RECONCILIATION OF REPORTED NET INCOME (GAAP) TO OPERATING EARNINGS (NON-GAAP
MEASURE) - UNAUDITED
                          Three months ended          Nine months ended
                          September 30,               September 30,
                          2013            2012        2013         2012
Reported net income       $   58,984      $ 51,183    $ 156,569    $ 139,620
Pre-tax Entergy
transaction related           9,997         7,533       43,385       17,667
expenses
Pre-tax liability for         103           54          308          13,047
audit related refund
Income taxes on               (2,574)       (2,711)     (11,618)     (10,816)
adjustments
Operating earnings        $   66,510      $ 56,059    $ 188,644    $ 159,518



RECONCILIATION OF REPORTED DILUTED EPS (GAAP) TO OPERATING DILUTED EPS
(NON-GAAP MEASURE) - UNAUDITED
                               Three months ended         Nine months ended
                               September 30,              September 30,
                               2013           2012        2013       2012
Reported diluted EPS           $  1.12        $  0.98     $ 2.96     $ 2.68
Pre-tax Entergy transaction       0.19           0.14       0.82       0.33
related expenses
Pre-tax liability for audit       0.00           0.00       0.01       0.25
related refund
Income taxes on adjustments       (0.05)         (0.05)     (0.22)     (0.21)
Operating diluted EPS          $  1.26        $  1.07     $ 3.57     $ 3.05



ITC HOLDINGS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
                                                   September 30,  December31,
(in thousands, except share data)                  2013           2012
ASSETS
Current assets
Cash and cash equivalents                             $ 50, 704       26,187
Accounts receivable                                103,585        72,192
Inventory                                          36,282         37,357
Deferred income taxes                              18,925         23,014
Regulatory assets — revenue accruals, including    6,620          7,489
accrued interest
Prepaid and other current assets                   18,053         31,987
Total current assets                            234,169        198,226
Property, plant and equipment (net of accumulated
depreciation and amortization of                   4,687,581      4,134,579
 $1,319,710 and $1,269,810, respectively)
Other assets
Goodwill                                           950,163        950,163
Intangible assets ( net of accumulated             49,431         48,492
amortization of $20,801 and $18,397, respectively)
Other regulatory assets                            186,926        180,378
Deferred financing fees (net of accumulated
amortization of $14,390 and $17,838,               26,279         19,293
 respectively)
Other                                              37,851         33,678
Total other assets                              1,250,650      1,232,004
TOTAL ASSETS                                       $  6,172,400   $ 5,564,809
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable                                   $    105,285   $ 123,022
Accrued payroll                                    17,738         20,740
Accrued interest                                   30,170         44,708
Accrued taxes                                      17,650         28,117
Regulatory liabilities — revenue deferrals,        38,296         53,763
including accrued interest
Refundable deposits from generators for            29,656         40,745
transmission network upgrades
Debt maturing within one year                      210,000        651,929
Other                                              16,759         40,287
Total current liabilities                       465,554        1,003,311
Accrued pension and postretirement liabilities     58,395         53,243
Deferred income taxes                              555,038        460,072
Regulatory liabilities — revenue deferrals,        74,223         28,613
including accrued interest
Regulatory liabilities — accrued asset removal     70,226         75,477
costs
Refundable deposits from generators for            15,392         7,623
transmission network upgrades
Other                                              20,139         26,317
Long-term debt                                     3,364,900      2,495,298
STOCKHOLDERS' EQUITY
Common stock, without par value, 100,000,000
shares authorized, 52,471,354 and 52,248,514       1,003,709      989,334
shares issued and outstanding at September 30,
2013 and December 31, 2012, respectively.
Retained earnings                                  538,317        443,569
Accumulated other comprehensive income (loss)      6,507          (18,048)
Total stockholders' equity                      1,548,533      1,414,855
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY         $ 6,172,400    $ 5,564,809



ITC HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                                     Nine months ended
                                                     September 30,
(in thousands)                                       2013          2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                           $  156,569    $  139,620
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization expense              87,583        78,453
Recognition, refund and collection of revenue
accruals and deferrals — including accrued           30,369        25,748
 interest
Deferred income tax expense                        69,733        44,921
Allowance for equity funds used during             (25,315)      (15,800)
construction
Other                                              13,113        9,030
Changes in assets and liabilities, exclusive of
changes shown separately:
Accounts receivable                              (31,115)      (12,182)
Inventory                                        1,075         979
Prepaid and other current assets                 11,208        (5,776)
Accounts payable                                 4,044         (10,637)
Accrued payroll                                  (1,707)       (1,865)
Accrued interest                                 (14,538)      (247)
Accrued taxes                                    (10,467)      (5,773)
Other current liabilities                        7,979         11,474
Other non-current assets and liabilities, net    (6,328)       410
Net cash provided by operating activities          292,203       258,355
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment       (630,485)     (637,386)
Proceeds from sale of securities                     42,174        5,935
Purchases of securities                              (43,398)      (10,786)
Other                                                (3,340)       (747)
Net cash used in investing activities              (635,049)     (642,984)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of long-term debt                           933,025       100,000
Borrowings under revolving credit agreements         890,400       1,073,550
Borrowings under term loan credit agreements         535,000       200,000
Retirement of long-term debt                         (452,000)     —
Repayments of revolving credit agreements            (1,004,100)   (960,350)
Repayments of term loan credit agreements            (475,000)     —
Issuance of common stock                             8,213         4,929
Dividends on common stock and restricted stock       (61,821)      (55,677)
Refundable deposits from generators for transmission 26,898        31,157
network upgrades
Repayment of refundable deposits from generators for (30,279)      (31,186)
transmission network upgrades
Other                                                (2,973)       (6,112)
Net cash provided by financing activities         367,363       356,311
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 24,517        (28,318)
CASH AND CASH EQUIVALENTS — Beginning of period      26,187        58,344
CASH AND CASH EQUIVALENTS — End of period            $  50,704     $  30,026



SOURCE ITC Holdings Corp.

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